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Spotify Technology SA fell as much as 10 per cent after the online music service reported fewer-than-expected new users in the second quarter, blaming the pandemic for another period of sluggish growth.
The company added 9 million monthly active users in the period, bringing the total to 365 million, according to a statement Wednesday. That fell short of the company’s own forecast, as well as the 372.5 million average estimate on Wall Street.
The pandemic suppressed growth in several markets, such as India, and led to the cancellation of marketing campaigns. The company had warned in April that the global health crisis might slow its growth in 2021, but numbers still fell short of expectations.
Spotify Shares fell 7.8 per cent to US$218.45 at 11:06 a.m. in New York and dropped as low as US$213.11, marking the biggest intraday decline in three months. The stock had fallen 25 per cent this year through Tuesday’s close.
While it isn’t clear how long the slowdown will last, the Stockholm-based company expects to conclude the year with 400 million to 407 million users. Wall Street expects 414.5 million. Premium subscribers grew 20 per cent in the quarter from a year earlier to 165 million.
Many of Spotify’s financial metrics matched or beat estimates. The company reported sales grew 23 per cent to 2.33 billion euros (US$2.75 billion), a shade above forecasts, while gross profit stood at 663 million euros.
Spotify’s advertising business is booming. The company credited both podcasts and direct sales for the 110 per cent year-over-year jump in advertising sales to 275 million euros. Advertising now contributes about 12 per cent of total revenue after accounting for less than 10 per cent for most of Spotify’s existence.
The company has spent billions of dollars attempting to expand its service from just music into all kinds of audio. Aggregate consumption of podcasts rose 95 per cent on Spotify from a year ago. That number was 30 per cent on a per user basis.