Spotify Shares Drop After Third-Quarter Forecasts Miss Estimates
Spotify Technology SA shares fell after the company issued third-quarter user and income forecasts that failed to meet analyst expectations despite strong second-quarter results.
Shares of Spotify Technology SA fell between 4% and 6.4% in premarket trading on Tuesday after the company released third-quarter projections that missed Wall Street estimates. Spotify forecasts monthly active users will reach 788 million and operating income will be €670 million for the current period, citing slowing user growth in Europe and North America.
These outlooks follow a strong second quarter where the company reported a 14% revenue increase to €4.78 billion. Total users grew 12% year-over-year to 777 million, with paying subscribers increasing 9% to 300 million. Adjusted operating income for the quarter reached €655 million, exceeding expectations due to strong revenue and lower payroll taxes.
To counter competition from Netflix, YouTube, and AI startups such as Suno and Udio, Spotify is integrating AI into its product rollout to drive personalization. New initiatives include Personal Podcasts and a service called Reserved. The company is also expanding its ecosystem through partnerships with Live Nation Entertainment Inc. for concert ticketing and Universal Music Group NV for an AI-powered song remixing product. Additionally, Spotify reached an agreement with the licensing firm Merlin to allow artists on specific labels to use a paid tool for fan-made covers and remixing.
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