Shares of Spotify Technology SA fell in pre-market trading after the world's largest music streaming service gave a disappointing forecast for active users and operating income in the third quarter, UNN reports, citing Bloomberg.
Details
Monthly active users will rise to 788 million in the current period, the Stockholm-based company said in a statement on Tuesday. This compares with the average analyst estimate of 793.5 million. Operating profit in the third quarter will be 670 million euros ($771 million), which also falls short of expectations.
While Spotify has traditionally focused on subscriber growth as a way to increase revenue, it is now regularly raising prices and hopes that its most loyal users will pay even more for access to special features. Investors are closely watching user numbers as a gauge of the company's health.
Spotify shares fell 6.4% in early trading before the market opened in New York. On Monday, the stock closed at $486.33, and is down 16% since the start of the year.
Total users rose 12% year-over-year to 777 million in the second quarter. Spotify reported a 9% increase in subscribers to 300 million, slightly above analyst forecasts of 299.2 million.
Revenue for the quarter rose 14% to 4.78 billion euros, slightly below expectations. Growth was driven by new subscribers worldwide and higher prices.
Adjusted operating income amounted to 655 million euros, exceeding analysts' forecast of 637 million euros. Spotify said that revenue growth offset additional content costs, including music, audiobooks, and video podcasts.
Earlier this year, Gustav Söderström, co-CEO, said the company had implemented artificial intelligence to speed up and increase the number of products released, as well as to better personalize the service to people's tastes.
Spotify and Universal to allow fans to create AI covers of songs23.05.26, 22:55
In May, the company showcased some of these developments during an investor day. For example, through a partnership with Live Nation Entertainment Inc., customers will gain access to tickets for concerts by their favorite artists. Many of the new products will be available exclusively to subscribers or will require users to pay more for their use.
Among these pricier offerings, the company announced an AI-based music product in partnership with Universal Music Group NV, the largest record label, which will allow users to pay for creating remixes or covers of songs in the app using AI.
Over the years, Spotify has sought to stand out among its competitors by expanding from a place focused solely on music to a place centered on diverse content that keeps users coming back. It now offers both podcasts and audiobooks, and is increasingly advancing into video content, which is standard on platforms like YouTube. The company has also begun allowing musicians to upload music videos directly to the platform.