Spotify shares fell more than 11% Tuesday, marking their worst single-day performance since July 2023. The sharp decline followed disappointing second-quarter results and weaker-than-expected guidance for the third quarter, raising concerns among investors.
The music streaming giant posted a net loss of 86 million euros for the quarter, translating to a loss of 42 euro cents per share. This contrasts with the prior year’s net income of 225 million euros, or 1.10 euros per share. Analysts had projected earnings of 1.90 euros per share, making the shortfall significant. Revenue came in at 4.19 billion euros, slightly below expectations of 4.26 billion, although it marked a 10% increase year-over-year from 3.81 billion euros.
Spotify attributed the loss to increased spending on personnel, marketing, professional services, and 115 million euros in social charges. The company’s guidance for the third quarter also fell short of market forecasts. It projected revenue of 4.2 billion euros, notably below the 4.47 billion euro estimate, partly due to a 490-basis-point impact from foreign exchange rates.
Despite financial setbacks, user growth remained strong. Monthly active users rose 11% year-over-year to 696 million, while premium subscribers increased 12% to 276 million. The ad-supported tier now represents over 60% of Spotify’s monthly user base. For the third quarter, the platform expects to reach 710 million monthly users and 281 million premium subscribers, driven by five million net additions.
Advertising-supported revenue declined by about 1% to 453 million euros. Still, the company sees potential in its ad technology and programmatic tools, with plans to enhance adoption in the second half of the year. CEO Daniel Ek acknowledged execution challenges but expressed confidence in Spotify’s long-term strategy.
During the quarter, Spotify launched a request feature for its AI DJ and expanded its audiobooks service to four new countries. Listening hours rose 35% in the U.S., U.K., and Australia. Meanwhile, the platform gained media attention when Velvet Sundown, an indie band that quickly amassed over a million listeners, was revealed to be mostly AI-generated.
Spotify concluded the quarter with over 7,300 full-time employees and expanded its share repurchase program by $1 billion. Despite the latest dip, Spotify shares are still up more than 40% in 2024, reflecting investor optimism earlier in the year after the company posted its first full year of profitability.
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