Spotify's stock gains as monthly active users fall short but margins improve

By Emily Bary

Premium subscriber performance was in line with expectations

Spotify Technology SA shares were rising about 3% in premarket trading Tuesday after the music-streaming company came up shy on monthly active users for the latest quarter but showed margin improvement.

The company posted first-quarter net income of EUR197 million, or 97 cents a share, whereas it recorded a loss of EUR225 million, or EUR1.16 a share, in the year-before period. Analysts tracked by FactSet had been expecting 62 cents a share in earnings.

Revenue rose to EUR3.63 billion from EUR3.04 billion, while the FactSet consensus was for EUR3.61 billion.

Spotify (SPOT) had 615 million monthly active users for the first quarter, up from 602 million in the fourth quarter and 515 million in the prior year's first quarter. Analysts were looking for 618 million, which was also Spotify's guidance.

The streaming company also recorded 239 million premium subscribers, in line with the FactSet consensus. Spotify's performance on the metric compares with 236 million premium subscribers in the fourth quarter and 210 million a year earlier.

"Although we saw greater MAU variability during the quarter amidst moderated marketing activity and organizational change, subscriber net additions of 3 million were in-line with guidance," Spotify said in its earnings materials, while premium average revenue per user and advertising revenue both saw improvements.

Ad-supported monthly active users were 388 million, up from 379 million in the fourth quarter and 317 million in the year-earlier first quarter. Analysts were modeling 391 million.

Spotify had a first-quarter gross margin of 27.6%, while its outlook had been for 26.4%. The company's margin performance in the first quarter compares with a 26.7% gross margin in the fourth quarter and a 25.2% gross margin in the year-earlier first quarter.

It expects a 28.1% gross margin for the second quarter.

The company also anticipates second-quarter total monthly active users of 631 million, as well as a premium subscriber base of 245 million. Analysts were modeling 639 million and 246 million, respectively. Spotify's revenue outlook for the period calls for EUR3.8 billion, essentially in line with the FactSet consensus.

-Emily Bary

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04-23-24 0634ET

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