Spotify posts loss, blames poor advertising execution
Spotify is adding subscribers but losing money, with COO Daniel Ek blaming an advertising drop on poor execution. The Swedish music streaming platform posted a net loss of A$153 million for the second quarter, despite gaining users across all paid and ad-supported tiers.
Spotify’s June quarter revenue jumped 10% year-on-year, to A$7.43 billion (4.19 billion euro). This was below Wall Street estimates of A$7.56 billion. The company’s net loss of A$153 million was also well below expectations of a A$692 million profit, and notably down from its A$400 million net income in the same quarter last year.
The company’s operating expenses increased by 8%, year-on-year, which it put down to higher payroll and marketing costs. Advertising-supported revenues dropped by 1%, to A$803 million. This is despite more than 60% of its user base being on the ad-supported tier – a global audience of 420 million listeners.
Chief operating officer Daniel Ek was forthright about the results on an earnings call, saying the drop in advertising revenue was “really an execution challenge, not a problem with the strategy.”
He added: “While I’m unhappy with where we are today, I remain confident in the ambitions we laid out for this business.”
The company also posted lacklustre guidance for the current quarter, with its projected €4.19 billion revenue below the prior Wall Street consensus of €4.26 billion. The company says “foreign exchange rate movements” are to blame for the headwinds.
Spotify’s financial summary (click to enlarge)
This all resulted in Spotify’s stock crashing by more than 11% overnight, the company’s worst single day trading result since July, 2023. Despite this, shares are up 40% from a year ago. 2024 marked the first calendar year that the Swedish company had been profitable.
One bright spot was the continued increase in users. Spotify posted its second-highest Q2 monthly user growth in history, adding 18 million new users, up 11% year-on-year, against guidance of 11 million, while its 8 million new paid subscribers outpaced the expected 5 million.
Daniel Ek
Total monthly active users sits at 696 million, while the service has 276 million paying subscribers, up 12% from a year prior.
Spotify expects to reach 710 million monthly users by the end of the current quarter, with 5 million new paid subscribers.
Ek struck an upbeat note in his investor letter, writing: “People come to Spotify and they stay on Spotify.
“By constantly evolving, we create more and more value for the almost 700 million people using our platform.
“This value not only benefits users but it’s attracting more people to streaming and as a result, it’s also boosted the industries of music, podcasts, and audiobooks.”
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Failure to even mention the Spotify CEO’s recent invest in military AI drone technology is a huge blunder, sir. Regardless of this investment’s impact on Spotify’s revenue, it is an important and topical factor that should be noted in this article.
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