Spotify forecast second-quarter earnings and premium subscriber growth below Wall Street expectations, signalling a slowdown in key markets.
The Swedish streaming giant’s shares fell nearly 9% in premarket trading following the announcement.
The company’s outlook comes at a time when investors are closely tracking profitability after recent price hikes and cost-cutting measures.
Spotify has also been investing in artificial intelligence features to boost user engagement and discovery.
Earnings guidance falls short of expectations
Spotify said it expects operating income of 630 million euros ($736.41 million) for the second quarter, as reported by Reuters.
This is below analysts’ average estimate of 684 million euros compiled by LSEG.
The guidance marks a sharp contrast with the company’s first-quarter performance.
Spotify reported a record operating income of 715 million euros in Q1, beating estimates of 681.6 million euros.
The first-quarter results were supported by lower payroll taxes.
These taxes, also known as social charges, are linked to the company’s share price.
Lower stock prices can reduce such costs.
Spotify’s shares have declined about 15% so far this year.
Competitive pressure and leadership transition
Spotify operates in a competitive streaming market alongside companies such as Apple and Amazon.
The company is currently led by co-CEOs Gustav Söderström and Alex Norström.
Founder Daniel Ek transitioned to the role of executive chairman earlier this year.
AI features remain a strategic focus
Spotify has been expanding its artificial intelligence capabilities to enhance its platform.
The company introduced voice interaction features in its AI DJ tool and rolled out AI Playlist functionality, which allows users to generate playlists using natural-language prompts.
Earlier this month, Spotify expanded its Prompted Playlist feature to include podcasts.
This allows users to create curated content based on listening habits across both music and podcasts.
Subscriber growth misses estimates
Spotify projected monthly active users (MAU) of 778 million for the second quarter, exceeding analyst expectations of 773 million.
However, its forecast for premium subscribers disappointed.
The company expects an increase of 6 million subscribers, taking the total to 299 million.
This is below expectations of 302 million.
The data indicates that fewer new users are coming from Europe and North America, Spotify’s key markets.
In the first quarter, premium subscribers rose 9% to 293 million, slightly below estimates of 294.5 million.
Monthly active users increased by 10 million to 761 million, surpassing expectations of 756.6 million.
Revenue outlook largely in line
Spotify reported first-quarter revenue of 4.53 billion euros, up 8% and in line with analyst estimates.
Looking ahead, the company forecast second-quarter revenue of 4.8 billion euros.
This is broadly in line with estimates of 4.77 billion euros.
Despite stable revenue projections, the weaker subscriber outlook and softer earnings guidance highlight growing challenges in maintaining momentum in mature markets.
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