Spotify forecasts weak profit as user growth slows in North America, Europe
Spotify's Financial Performance and User Growth Trends
Third-Quarter Profit Forecast and Market Reaction
Aug 4 (Reuters) - Spotify forecast third-quarter profit below Wall Street estimates on Tuesday, after the streaming giant reported slowing user growth in major markets of Europe and North America, driving shares nearly 4% lower in premarket trading.
AI Features and Competitive Landscape
The company has launched AI features like "Personal Podcasts" and new offerings such as "Reserved" to attract more users and fend off competition from rivals including YouTube and Netflix, and AI music startups like Udio and Suno.
New Licensing Agreement with Merlin
Separately on Tuesday, Spotify announced a new agreement with digital music licensing firm Merlin for the Swedish company's upcoming paid tool for fan-made covers and remixing. It will allows artists on labels under Merlin's Spotify agreement to participate.
Financial Results and Analyst Expectations
Operating Income and Revenue
The company said it expects operating income of €670 million ($770.97 million) in the third quarter, below analysts' average estimates of €677.8 million, according to data compiled by Visible Alpha.
In the second quarter, its operating income came in at €655 million, beating estimates of €639.2 million, driven by strong revenue growth and lower payroll taxes.
Impact of Social Charges and Share Price
Such taxes, called social charges, are tied to the value of the company's share price. The company's shares have fallen about 16% so far this year.
The company's quarterly revenue rose 14% to €4.78 billion, slightly below LSEG-compiled estimates of €4.80 billion. The revenue forecast of €5 billion for the third quarter was slightly above estimates of €4.93 billion.
User Metrics and Regional Trends
Monthly Active Users and Premium Subscribers
Its monthly active users forecast of 788 million was below Visible Alpha estimates of 793.6 million, while its outlook for a 5 million increase in premium subscribers to 305 million was largely in line with estimates.
Regional Contribution to User Base
While total MAUs and premium subscribers grew, North America and Europe's percentage contribution to total MAUs declined. Europe's share of premium subscribers has also continued to drop.
Additional Information
($1 = 0.8690 euros)
(Reporting by Jaspreet Singh in Bengaluru; Editing by Leroy Leo)
