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Stocks of Spotify Rise After Earnings as User Growth Surprises

February 6, 2024
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Spotify Technology SA surpassed Wall Street expectations in its latest quarter, driving an increase in its stock during premarket trading. The music-streaming giant reported 602 million monthly active users in the fourth quarter, reflecting a 5% increase from the previous quarter and exceeding analysts' expectations of 601 million, as per FactSet data. Additionally, Spotify disclosed 236 million premium subscribers, a 4% increase from the third quarter and surpassing the 235 million forecasted by analysts.

Spotify attributed its strong performance to notable growth in Latin America and its Rest of World locations. The company emphasized the better-than-anticipated response to a promotional campaign, particularly regarding premium subscriber uptake.

Despite outperforming on subscriber metrics, Spotify fell slightly short on revenue, reporting €3.67 billion compared to analysts' expectations of €3.72 billion. Nevertheless, the company achieved an all-time high in advertising-supported revenue, reaching €501 million. Spotify's gross margin of 26.7% slightly exceeded the company's guidance of 26.6%. This positive news led to a 5% increase in shares during premarket trading on Tuesday.

In the fourth quarter, Spotify reported a net loss of €70 million, or 36 cents per share, a significant improvement compared to the year-earlier period's loss of €430 million, or €2.93 per share. The results exceeded analysts' expectations, who were anticipating a 37-cent loss per share.

Looking ahead to the first quarter, Spotify anticipates 618 million monthly active users and 239 million premium subscribers. While this outlook is slightly below the FactSet consensus of 619 million MAUs and 238 million premium subscribers, the company remains optimistic. Spotify projects total revenue of €3.6 billion for the first quarter, aligning closely with the consensus view. However, it expects currency movements to negatively impact year-over-year revenue growth by 250 basis points.

Overall, Spotify's positive user growth and improved financial metrics, combined with strong performance in key regions and successful promotional efforts, have contributed to a boost in investor confidence, reflected in the uptick in premarket stock trading.

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Valentyna Semerenko
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