The Spotify logo appears above the post where it trades on the floor of the New York Stock Exchange in April 2018.Richard Drew/The Associated Press
Spotify SPOT-N forecast third-quarter profit below Wall Street estimates on Tuesday, after the streaming giant reported slowing user growth in major markets of Europe and North America, driving shares nearly 4 per cent lower in premarket trading.
The company has launched AI features such as “Personal Podcasts” and new offerings such as “Reserved” to attract more users and fend off competition from rivals including YouTube and Netflix NFLX-Q, and AI music startups like Udio and Suno.
Separately on Tuesday, Spotify announced a new agreement with digital music licensing firm Merlin for the Swedish company’s upcoming paid tool for fan-made covers and remixing. It will allows artists on labels under Merlin’s Spotify agreement to participate.
The company said it expects operating income of €670-million (US$770.97-million) in the third quarter, below analysts’ average estimates of €677.8-million, according to data compiled by Visible Alpha.
In the second quarter, its operating income came in at €655-million, beating estimates of €639.2-million, driven by strong revenue growth and lower payroll taxes.
Such taxes, called social charges, are tied to the value of the company’s share price. The company’s shares have fallen about 16 per cent so far this year.
The company’s quarterly revenue rose 14 per cent to €4.78-billion, slightly below LSEG-compiled estimates of €4.80-billion. The revenue forecast of €5-billion for the third quarter was slightly above estimates of €4.93-billion.
Its monthly active users forecast of 788 million was below Visible Alpha estimates of 793.6 million, while its outlook for a 5 million increase in premium subscribers to 305 million was largely in line with estimates.
While total MAUs and premium subscribers grew, North America and Europe’s percentage contribution to total MAUs declined. Europe’s share of premium subscribers has also continued to drop.