Shares of Spotify fell around 4% on Tuesday after the Sweden-based music streaming company reported second-quarter results that missed analyst expectations and issued weaker-than-anticipated guidance for the current quarter.
For the second quarter, Spotify posted a net loss of €86 million, translating to a loss of €0.42 per share.
This fell short of analyst forecasts of €1.90 in earnings per share, according to estimates from LSEG.
A year ago, the company had posted a profit of €225 million, or €1.10 per share.
In terms of top line, Spotify reported revenues of €4.19 billion, up 10% from €3.81 billion in the same quarter last year, but still below the €4.26 billion expected by analysts.
The shortfall, along with a more cautious outlook for the third quarter, weighed on investor sentiment.
Looking ahead, Spotify expects third-quarter revenue to come in at €4.2 billion, significantly below the €4.47 billion estimate from StreetAccount.
The company cited a 490-basis-point headwind due to foreign exchange fluctuations as a factor impacting guidance.
At the time of writing, Spotify shares were down 3.95% after recovering some losses.
User and subscriber growth remains strong
Despite the earnings miss, Spotify continued to demonstrate solid user growth.
Monthly active users (MAUs) reached 696 million during the quarter, marking an 11% year-over-year increase.
The company also added paying subscribers at a healthy pace, with premium memberships rising 12% from a year earlier to 276 million.
For the third quarter, Spotify projects further gains in both MAUs and premium subscribers.
The company is targeting 710 million monthly active users, including 14 million net additions.
On the subscription side, Spotify expects to add 5 million new premium subscribers, bringing the total to 281 million.
The user growth figures reflect continued demand for the platform’s offerings, even as macroeconomic and currency-related headwinds persist.
Engagement remains a key focus area, particularly around Spotify’s artificial intelligence DJ feature.
The company noted that usage of the AI DJ has doubled over the past year, with new features, such as a user request function, being introduced during the quarter to further enhance personalization and retention.
Long-term profitability trends offer a silver lining
In 2024, the company reported its first full year of profitability, a milestone that helped fuel investor optimism earlier in the year.
Spotify shares have surged 57% year-to-date, reflecting confidence in the company’s ability to balance growth with improving financial discipline.
However, the latest results may prompt some reassessment of short-term momentum, particularly as the company navigates currency volatility and margin pressures.
Still, with robust user and subscriber growth, as well as ongoing innovation in personalized content and AI-driven features, Spotify remains a central player in the streaming industry.
Whether it can translate that user growth into consistent profits will be a key focus for investors going forward.
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