Shares of Spotify Technology (SPOT) are sinking at the time of writing after the music streaming platform reported that it gained millions of new users in the second quarter but still posted a net loss. Indeed, monthly active users increased by 11% to 696 million, which was 7 million higher than the company’s forecast. Furthermore, premium subscribers, Spotify’s most profitable customers, grew by 12% to 276 million. This beat guidance by 3 million. Still, even with this growth, Spotify reported a net loss of €0.42 per share, or $0.49, compared to a profit of €1.33, or $1.54, a year earlier. For reference, analysts were expecting a profit of $2.26 per share, or €1.95.
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The loss was mainly due to higher costs, including more spending on staff, professional services, and marketing, along with $115 million in payroll-related social charges, which are payroll taxes that rise when the stock price goes up. CEO Daniel Ek said subscriber growth in the first half of the year was 30% faster than last year, but improvements to Spotify’s advertising business are taking longer than planned. He called this “an execution challenge, not a problem with the strategy,” and added that he is still confident in the company’s goals.
Overall revenue rose by 10% to €4.19 billion, thanks to a 12% jump in premium revenue, although ad-supported revenue slipped slightly. Interestingly, Spotify is continuing to expand its offerings beyond music, with podcasts and audiobooks. In addition, video podcast streaming is rising 20 times faster than audio podcasts, with more than 350 million users watching video podcasts on the platform. Audiobook listening hours are also up 35% year over year in the U.S., U.K., and Australia.
2025 Outlook
Looking ahead to the third quarter, Spotify expects monthly active users to rise to 710 million and premium subscribers to reach 281 million. It is also forecasting revenue of €4.2 billion and a gross margin of 31.1% as it works to increase profitability through price hikes and tighter spending.
Is SPOT Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SPOT stock based on 19 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPOT price target of $776.48 per share implies 22.4% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
