The market is reacting negatively to the interim report, according to Bloomberg, as the growth forecast for the second quarter was unexpectedly low. The profit for the first quarter looks slightly worse than expected.
Daniel Ek describes the engagement among Spotify's users as high.
"Users are staying and thanks to our freemium model, people have greater flexibility to continue as Spotify users even when the surrounding world feels more uncertain. In the short term, it may be a bit noisy, but we feel confident about our long-term development and the direction we have taken feels clearer than ever", he writes.
Worse than expected
Revenues for the quarter increased by 15 percent to 4.2 billion euros, while the operating result surged to 509 million euros from 168 million a year earlier.
The gross margin – i.e. the gross profit share of revenues – increased to 31.6 percent.
Spotify's own forecast for revenues for the quarter was 4.2 billion euros, while the operating profit was estimated to be 548 million euros – with a gross margin of 31.5 percent. Analysts' expectations were in line with Spotify's forecast, according to Bloomberg.
According to Spotify, the result was weighed down by social fees, which explains why the profit was lower than expected.
The number of monthly users of Spotify increased to 678 million during the first quarter, an increase of 10 percent compared to the corresponding quarter a year earlier. The number of so-called premium subscribers increased by 12 percent to 268 million.
Information about price increases this summer
Spotify's own forecast – which was in line with market expectations – was 678 million monthly users for the quarter, of which 265 million were premium users.
Spotify's share was one of the winners on Wall Street so far this year, with a price increase of 34 percent. Competitors in streaming – tech giants like Apple, Amazon, and Alphabet – have fallen sharply this year.
But after the interim report, Spotify fell in futures trading on Wall Street, down around 5 percent according to Bloomberg.
According to unconfirmed information in the Financial Times earlier in the week, Spotify plans to raise prices on subscriptions in several European and Latin American countries in June, but not in the USA.
Spotify raised prices in individual European countries – Belgium, the Netherlands, and Luxembourg – in April.
In its forecast for the second quarter, Spotify expects the total number of users to continue to rise to 689 million, which would be a net addition of 11 million. The number of premium subscribers is expected to continue to rise to 273 million, a net increase of 5 million.
The revenue forecast for the second quarter is 4.3 billion euros, while the forecast for the operating result is 539 million euros.
The gross margin – i.e. the gross profit share of revenues – is forecast to be 31.5 percent for the second quarter, i.e. in line with the 31.6 percent for the first quarter.
Spotify, headquartered in Stockholm, had 7,258 full-time employees worldwide at the end of the first quarter.
Source: Spotify
