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On Tuesday, Spotify announced the addition of 5 million paying subscribers during the first quarter, suggesting that its investment in podcasts is effectively attracting users beyond just music.
However, the company’s stock experienced a significant decline following the release of its quarterly report. Although Spotify’s revenue met analyst expectations, its operating profit fell short, leading to some disappointment amongst investors who may have anticipated a higher user growth following a record-setting quarter to conclude 2024.
Analysts had forecasted an operating profit of $623 million, but Spotify reported only $545 million. As a result, the streaming platform’s stock, previously a standout performer in the tech sector this year, fell by 8% in early trading shortly after the report was made public.
Spotify CEO Daniel Ek expressed confidence in the company’s position as a cost-effective entertainment choice amid a challenging global economic environment. He highlighted, “The underlying data at the moment is very healthy: engagement remains high, retention is strong, and thanks to our freemium model, people have the flexibility to stay with us even when things feel more uncertain.” Ek remains optimistic about the long-term trajectory, despite short-term challenges.
Here are some key highlights from the report:
Revenue: Spotify reported a revenue of €4.20 billion (approximately $4.78 billion), aligning with analyst predictions and reflecting a 15% increase year-over-year.
Subscribers: The addition of 5 million premium subscribers brought the total to 268 million, surpassing projections of approximately 3 million new subscribers for the quarter. Notably, this increase helped balance out a loss of 2 million ad-supported users, leading to a total of 423 million ad-supported customers.
Following a record holiday quarter where it gained 11 million new premium subscribers, this was Spotify’s second-best first quarter for subscriber growth, following 2020.
Monthly Active Users: By the end of March, Spotify had 678 million monthly active users, representing a 10% rise year-over-year. However, this figure appears less impressive compared to a record addition of 35 million during the fourth quarter of 2024.
Earnings Per Share: The company reported an EPS of €1.07, which fell short of the expected €2.00 from analysts.
Looking forward, Spotify projected that its second-quarter results could be “subject to substantial uncertainty” but anticipates adding another 5 million paying subscribers and achieving sales of €4.30 billion.
Podcasts, particularly video podcasts, are becoming a focal point for Spotify. The company recently launched the “Spotify Partners Program,” which aims to provide creators with enhanced tools for producing and monetizing video podcasts. This initiative is particularly appealing as Spotify plans to compensate podcasters based on the viewership amongst Premium subscribers.
This launch aligns with Spotify’s strategy to compete more aggressively with YouTube, the leading platform for American podcast consumers. Reports indicate that Spotify has considerably expanded its catalog of video podcasts, increasing from 100,000 in 2023 to over 330,000 by the end of the first quarter, designed to retain podcast listeners within its ecosystem.
Heading into this week, Spotify remained one of the few major tech companies whose stock has not experienced a drop in 2025. The stock has risen 30% year-to-date and, following a peak of $652.53 in February, traded at nearly $598 per share as of Monday’s market close.
Spotify will conduct a conference call at 8:00 a.m. ET to elaborate on its first quarter results.
More to come…
Source
www.thewrap.com