Spotify Sees Significant Profit Increase, Yet Misses Market Expectations

Spotify has reported a notable increase in profits for the recent quarter, but the results fell short of market forecasts, leading to a negative reaction from investors. According to Bloomberg, the growth outlook for the second quarter was unexpectedly low, causing concern among analysts.

The company's CEO remarked on the high engagement levels among Spotify's users, emphasizing that the platform's freemium model allows for greater flexibility, enabling users to remain subscribed even amidst uncertain economic conditions. Despite short-term fluctuations, Spotify remains confident in its long-term trajectory and strategic direction.

In terms of financial performance, Spotify's revenues climbed by 15% to reach EUR4.2 billion, while operating profit surged to EUR509 million, up from EUR168 million in the same quarter of the previous year. The gross margin, representing the proportion of gross profit to revenue, increased to 31.6%.

Spotify's own revenue projections aligned with the actual figures, targeting EUR4.2 billion in revenue for the quarter, while the operating profit was anticipated to be EUR548 million, with a gross margin of 31.5%. Analysts' expectations were generally in agreement with Spotify's forecasts.

However, the company attributed its lower-than-expected profit to social charges amounting to EUR75 million, which impacted the overall earnings.

The number of monthly users on Spotify rose to 678 million during the first quarter, marking a 10% increase compared to the same period last year. Premium subscribers also grew by 12%, reaching 268 million.

Spotify's own estimates for the quarter were consistent with market expectations, projecting 678 million monthly users, including 265 million premium subscribers.

Prior to the earnings report, Spotify's stock had performed well on Wall Street this year, gaining 34%. In contrast, competitors in the streaming sector, including major tech companies such as Apple, Amazon, and Alphabet, experienced significant declines due to market turbulence following tariffs imposed by the Trump administration.

Following the quarterly earnings announcement, Spotify's stock saw a sharp decline in after-hours trading, dropping by over 8% as reported by Bloomberg.

Additionally, unconfirmed reports from the Financial Times suggested that Spotify plans to increase subscription prices in several European and Latin American countries in June, although there will be no changes in the United States. The company had previously raised prices in certain European markets, including Belgium, the Netherlands, and Luxembourg, earlier in April.