Categories Earnings, LATEST, Technology

Spotify stock falls 7% on dismal outlook, after first earnings report

Continuing the trend that began nearly a decade ago, Spotify (SPOT) reported a loss for the first quarter despite higher revenues. Announcing the first quarterly results after last month’s IPO, the music streaming service guided second quarter revenues below expectations, sending the stock down more than 6% in the after-hours.

The Swedish firm posted a loss of EUR 1.01 per share in the first three months of 2018, compared to an EUR 1.15 per share loss last year. The improvement is attributable to a 26% growth in revenues to EUR 1.1 billion, which matched the Street view. However, the top line came in slightly below expectations, which is typical for companies reporting their first post-IPO results.

Picture Courtesy: Mirjora

The total number of Monthly Active Users at the end of the quarter was 170 million, up 30% compared to last year. There were more than 75 million premium subscribers and 99 million ad-supported users, up 45% and 21% respectively.

The company sees a modest increase in its user base in the second quarter when revenue is expected to be in the range of EUR 1.1 billion to EUR 1.3 billion. Second-quarter operating loss is estimated to be between EUR 60 million and EUR 140 million. Full-year revenue is forecasted between EUR 4.9 billion and EUR 5.3 billion, and operating loss in the range of EUR 230 million and EUR 330 million.

Spotify became a publically traded company on April 3, 2018, when its shares started trading on the New York stock exchange. Despite being the world’s largest music streaming service, the company has been registering losses continuously since its inception ten years ago.

The company’s excessive reliance on record labels, which makes revenue generation difficult, has cast doubts on the feasibility of its business model. Spotify pays huge amounts as royalties on the music content it provides, while negative cash flow and mounting losses continue to squeeze its finances.

The number of Monthly Active Users was 170 million at the end of the quarter, up 30% compared to last year

For a turnaround, the company will have to improve margins by exploring sources of ancillary revenues independent of record labels, such as advertisement. Interestingly, Spotify is ruling the roost in the music streaming sphere with its impressive subscriber base that is more than double that of the closest rival Apple Music.

Shares of Spotify, which climbed more than 10% since the IPO, gained nearly 4% in Wednesday’s regular session. However, following the earnings announcement, the stock reversed the trend and dropped sharply in the extended trading hours.

Most Popular

Earnings calendar for the week of May 17

Benchmark stock indexes pared their recent gains early this week amid elevated inflation concerns, but regained a part of the momentum later aided by recovery in tech stocks. The Dow

Aurora Cannabis (ACB) Earnings: 3Q21 Key Numbers

Aurora Cannabis Inc. (NYSE: ACB) reported third quarter 2021 earnings results today. Total revenues fell 25% year-over-year to CAD55.1 million. Adjusted EBITDA loss amounted to CAD24 million. Cash balance as

Walt Disney (DIS) Q2 revenue down 13%; earnings beat estimates

Media behemoth The Walt Disney Company (NYSE: DIS) reported second-quarter revenues that declined from last year as customers stayed away from theatres and parks due to pandemic-related safety issues and

Tags

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top