Spotify stock falls 8% on disappointing Q2 user guidance

Spotify (SPOT) reported disappointing idiosyncratic and fiscal guidance connected Tuesday, sending shares down implicit 8% successful aboriginal premarket trading.

The institution guided to 2nd 4th monthly progressive users (MAUs) of 689 million, beneath the astir 694 cardinal analysts polled by Bloomberg had expected. Q2 guidance for operating income and gross margins besides fell abbreviated of expectations.

For the archetypal quarter, MAUs roseate 10% twelvemonth implicit twelvemonth to 678 million, a flimsy miss compared to the 679 cardinal estimate. Premium subscribers roseate 12% implicit the anterior twelvemonth to 268 million, the second-highest Q1 subscriber nett summation successful the company's history.

“The underlying information astatine the infinitesimal is precise healthy: engagement remains high, retention is strong, and acknowledgment to our freemium model, radical person the flexibility to enactment with america adjacent erstwhile things consciousness much uncertain,” Spotify CEO Daniel Ek said successful the net release.

“So yes, the abbreviated word whitethorn bring immoderate noise, but we stay assured successful the semipermanent story, and the absorption we’re heading successful feels clearer than ever.”

Heading into the results, Wall Street analysts person said the euphony level acts arsenic a antiaircraft play amid ongoing macroeconomic uncertainty weighing connected Big Tech — akin to chap streaming elephantine Netflix.

"It is our presumption that SPOT's subscription exemplary should beryllium much defensive/utility-like amid the existent macro uncertainty," Bank of America expert Jessica Reif Ehrlich wrote up of the results.

Shares surged to all-time highs of astir $652 successful mid-February. Although the banal is disconnected those records, it's inactive climbed astir 106% implicit the past twelvemonth arsenic of Monday's close, a stark comeback from the grounds lows it faced successful 2022.

In February, the institution reported its archetypal afloat twelvemonth of profitability and besides acceptable quarterly grounds highs for revenue, gross margin, operating income, and escaped currency flow.

The company's colossal run-up successful shares follows an aggravated concern overhaul, which has included everything from wide layoffs and C-suite shakeups to a displacement distant from podcast exclusivity, an country it had aggressively pursued.

Spotify has drastically scaled backmost its podcast investments aft spending $1 cardinal to propulsion into the marketplace betwixt 2019 and 2021. It has since chopped costs and narrowed its contented focus, though it remains committed to the medium.

On Monday, Spotify said it paid much than $100 cardinal to podcast publishers and podcasters worldwide successful the archetypal quarter, reflecting what it called "our heavy committedness to the creator economy." That fig includes payments to creators crossed each formats and agreements, including marquee names similar Joe Rogan and Alex Cooper.