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Spotify Q2 profit forecast misses estimates as payroll taxes weigh down
The company's profitability is closely watched by investors looking for signs that it can bolster margins after years of prioritizing user growth.
While cost-cutting initiatives and price increases have aided profits in recent quarters, its latest earnings took a hit from taxes tied to higher salaries and benefits that jumped sharply due to an increase in the company's stock price.
Spotify recorded 76 million euros ($86.47 million) in such charges in the first quarter, offsetting lower marketing costs and weighing on its operating profit of 509 million euros, which was below the average analyst estimate of 518.2 million euros, according to data compiled by LSEG.
Its second-quarter profit forecast of 539 million euros includes 18 million euros in payroll taxes, and was below estimates of 557.5 million euros.
Still, strong subscriber growth showed that efforts to draw users with more video content and AI-powered services, including playlists generated with a simple written prompt, were working.
Premium subscribers rose 12 per cent to 268 million in the first quarter, beating Visible Alpha estimates of 265.3 million. The company had 678 million monthly active users, above estimates of 671.9 million.
"The underlying data at the moment is very healthy. The short term may bring some noise, but we remain confident in the long-term story," CEO Daniel Ek said.
Spotify's shares have risen about 34 per cent so far this year.
It expects monthly active users to rise to 689 million in the second quarter, compared with LSEG-compiled estimates of 684.9 million. Premium subscribers are expected to increase to 273 million, above Visible Alpha estimates of 271.5 million.
First-quarter revenue rose 15 per cent to 4.19 billion euros, slightly below LSEG-compiled estimates of 4.20 billion euros.
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Some reductions might have little to do with adoption of the technology and more with executives' desire to please investors. Efforts to reduce head count or restrain hiring show that an executive has a willingness to make tough calls, Sloane's Mukewa said. Companies such as Verizon are letting investors know they are pleased too. The company's head count is down roughly 4% from a year earlier, the telecommunication giant told investors last week. 'We have been very efficient on managing our resources," Vestberg, the CEO, said. 'So, very happy with that." Write to Chip Cutter at
