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Spotify Shares Dive 11%, Market Slams First Earnings Report

03 May, 2018, 15:33 | Author: Melinda Barton
  • A Spotify Sell Side Roundup Wall Street Largely Bullish On Streaming Platform's Stock

Music streaming company Spotify has made put out an array of new metrics with its first earnings report as a publicly-trading entity and it has shareholders reacting negatively and strongly so.

When the dust settled, Spotify posted revenue of $1.36 billion, a solid increase of about 26% year-over-year. As well, the company predicts €1.1-€1.3 billion in total revenue, gross margin of 24-26 percent and an operating loss of €60-€140 million.

While the subscriber results were largely in line with the expectations of analysts, shares of Spotify were sinking 10 percent in after-hours trading after rising 3 percent to $170 during Wednesday's regular session.

"Sony owned 5.707% of Spotify's shares (5.082% on a fully diluted basis) at the time of the public listing, approximately half of which have been sold to date", the filing reads.

Interestingly, the MAU count indicates that 4 million of Spotify's 75 million subscribers pay but don't listen.

Spotify may be offering a lesson about the downsides of its unconventional approach to its IPO earlier this year.

Average revenue per user in the first quarter fell to 4.72 euros, down from around 6.84 euros towards the end of 2015. By comparison, Apple Music, Spotify's next closest competitor, hit 40 million paid subscribers last month.


According to Spotify, the company at the end of March had 170 million active users.

Spotify's gross margin was above its guidance range at 24.9 percent in Q1, topping its expectations of 23-24 percent.

Spotify said that it still expected to lose $275 - $395 million (£202 - £291 million/ 230 to 330 million euros) for the year. Likewise, the company stated its Premium revenue would have been up 36 percent and ad-supported revenue would have grown 55 percent YOY, excluding the impact of foreign exchange rates.

On Wednesday, Spotify kept its outlook for full year 2018 unchanged, with monthly active users rising to between 198 million and 208 million.

Latin America and China saw the biggest market growth, with a rise in overall music revenue of 17.7 percent and 35.3 percent respectively.

A month ago Spotify unveiled an experience for free users.

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