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spotify on Tuesday reported strong third-quarter results that beat Wall Street expectations, with total revenue up 12% year-over-year, but issued a weak outlook for revenue and subscriber numbers for the current quarter.
Spotify stock fell 2% on Tuesday.
Here’s a comparison of what Spotify reported and LSEG’s estimates:
Earnings per share: 3.28 euros versus the expected 1.97 euros. Revenue: €4.27 billion versus expected €4.23 billion.
The streaming platform’s premium subscribers rose 12% to 281 million, slightly below StreetAccount’s forecast of 281.24 million.
In August, Spotify increased subscription prices from 10.99 euros to 11.99 euros in multiple markets, including South Asia, the Middle East, Africa, Europe, Latin America, and Asia Pacific.
Premium revenue in the third quarter increased by 9% and 13% at constant currency, while advertising revenue was 446 million euros, down 6% year-on-year and flat at constant currency.
StreetAccount expected advertising revenue of 467.7 million euros for the quarter.
“Business is healthy,” CEO Daniel Ek said in a release. “We’re shipping faster than ever before, and we have the tools we need to price, innovate products, leverage operations, and ultimately play back advertising to both increase revenue and expand profits.”
Spotify announced in September that Ek would step down in early January and transition to the role of executive chairman. Gustav Söderström and Alex Norström, who have served as executives and co-presidents for many years, will take their place.
The Swedish company forecast fourth-quarter sales of 4.5 billion euros, below StreetAccount’s forecast of 4.56 billion euros. The streamer expects total premium subscribers to reach 289 million in the fourth quarter, falling short of StreetAccount’s forecast of 291.1 million.
The streaming giant expects fourth-quarter operating profit of 620 million euros and MAU of 745 million euros. Both exceeded StreetAccount’s expectations of 610.2 million euros and 739.5 million MAU.
The company’s monthly active users rose 11% year over year to 713 million in the third quarter, exceeding prior guidance and LSEG analysts’ expectations of 710 million.
Spotify attributes this growth to multiple enhancements to its mobile free tier added in September, including the ability to select, play, and share any song. Free users previously had to listen to shuffled playlists with limited skips.
The company is also focusing on artificial intelligence, and launched its ChatGPT service in October. Users can now receive personalized music and podcast recommendations from chatbots based on written prompts.
Later that month, Spotify also announced partnerships with Sony Music Group, Universal Music Group, Warner Music Group, and other music agencies to develop AI products.
The company faced a backlash in June after Ek led a €600 million funding round for defense technology startup Hellsing, prompting many musicians to delete their catalogs in protest.
