Spotify stock fell 12% in premarket trading on April 28 after the company forecast second-quarter earnings and premium subscribers below Wall Street estimates. The streaming company now expects operating income of 630 million euros for the quarter, below the 684 million euros analysts had projected.
Spotify also said it expects monthly active users to reach 778 million in the second quarter and premium subscribers to rise by 6 million to 299 million. Analysts had expected 773 million monthly active users and 302 million premium subscribers. The softer outlook landed even after Spotify reported record first-quarter operating income of 715 million euros, ahead of the 681.6 million euros estimated by analysts.
The first-quarter result was helped by lower payroll taxes, while revenue rose 8% to 4.53 billion euros. Premium subscribers climbed 9% to 293 million and monthly active users increased by 10 million to 761 million. For the second quarter, Spotify forecast revenue of 4.8 billion euros, compared with analysts' estimate of 4.77 billion euros.
Investors have been watching Spotify's profitability closely after years of price increases and cost-cutting, and the latest numbers show the company still balancing growth with discipline. Spotify, which competes with Apple and Amazon in music and audio streaming, said slower growth is showing up in Europe and North America, its biggest markets.
The company has been adding artificial intelligence features to try to improve discovery and engagement, including voice interaction for AI DJ, AI Playlist for natural-language playlist generation and, earlier this month, an expansion of Prompted Playlist to podcasts. With shares already down around 15% this year, the gap between Spotify's strong recent profitability and its softer near-term forecast is now the central test for the business.
