Spotify wins big on top- and bottom-lines… but slight subscriber growth disappoints
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Spotify wins big on top- and bottom-lines… but slight subscriber growth disappoints

Global music streaming market-leader Spotify reported earnings this week that beat the Street’s predictions on top- and bottom-line growth… but narrowly missed consensus estimates for subscriber growth (to be fair to the company, it was within the guidance range provided). Despite this miss, Spotify’s results were strong, and it came in better than expected on pretty much every other metric investors could think of.

Spotify’s share price has appreciated by 39% year to date

Spotify August 2

Source: Yahoo Finance

Spotify reported revenues of 1.67 billion euros for the three months just gone – not a huge beat against consensus estimates (1.64 billion euros) but a clear one nonetheless. When it came to profit, Spotify overshot expectations by a greater degree, recording an operating loss of 3 million euros (analysts had expected that loss to come in at 56 million euros). Spotify also saw strong growth in the number of listeners on its platform: Wall Street had expected it to add 226 million, but the company reported 232 million new monthly users (note that this figure includes non-paying users, however).

Spotify’s only miss for the quarter came in the addition of new subscriptions (that is, users who pay). Analysts had hoped that the company would add 109 million – it actually added 108 million (Spotify’s own guidance range was between 107 million and 110 million). It is worth noting, however, that this still represents an enviable 31% year on year growth, a figure which CEO Daniel Ek said “is roughly twice the rate of growth of our next closest competitor.”

The big strategic news for Spotify at the moment is its foray into podcasts (thanks to two major acquisitions, Spotify is now the world’s largest podcast company). According to the company, podcasts are proving popular – but it’s still too early to assess how they will play into Spotify’s future offering.

On the company’s earnings call, Ek said that Spotify had “performed well in the second quarter,” and added some detail on how the streaming audio market is developing into a money-maker. He said:

“At our Investor Day in April of last year, we said that we're still in the early innings of the growth of the streaming audio market, and we still believe that true's today. As you can see from our second quarter results, we're really expanding the top of our funnel. Ad-Supported MAU growth accelerated in this quarter for the second consecutive year and was our fastest year-over-year growth rate since 2016.”

Disclosure

Dominion holds Spotify in its Global Trends Luxury Fund.


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