Key Takeaways
- First-quarter earnings per share of $3.45 surpassed analyst projections by $0.51
- Second-quarter operating income outlook of €630M fell short of the €684M consensus estimate
- Q2 premium subscriber projection of 299M disappointed versus 302M expected
- Advertising-supported revenue declined 5% compared to last year, though increased 3% in constant currency terms
- SPOT shares plummeted as much as 12% during premarket hours after the announcement
While Spotify exceeded Wall Street expectations across key metrics in the first quarter, market participants overlooked these achievements and zeroed in on future projections — which sparked significant concern.
The streaming platform posted first-quarter revenue of €4.53 billion, representing an 8% year-over-year increase and matching consensus forecasts. Earnings per share reached $3.45, exceeding predictions by $0.51. Monthly active users climbed to 761 million, surpassing the anticipated 756.6 million.
First-quarter operating income reached an all-time high of €715 million, beating the €681.6 million consensus. This milestone was partially driven by reduced payroll tax obligations, which correlate with Spotify’s stock performance — shares have declined approximately 15% year-to-date.
Premium membership grew 9% to reach 293 million in Q1, slightly trailing the 294.5 million projection, with 3 million net subscriber additions throughout the period.
The disappointment emerged with the second-quarter forecast.
Spotify projected Q2 operating income of €630 million — significantly below the €684 million Wall Street anticipated. This represents a considerable decline from the record-breaking first quarter.
The premium subscriber forecast of 299 million for Q2 also underwhelmed, falling short of the 302 million consensus. Management anticipates just 6 million net new subscribers.
MAU projections of 778 million for Q2 did exceed the 773 million estimate, indicating continued strength in the platform’s free tier.
Advertising Business Shows Weakness
The ad segment emerged as a notable vulnerability. Ad-supported revenue fell 5% year-over-year during the first quarter. When adjusted for constant currency, it increased 3%, but foreign exchange headwinds reduced total revenue growth by approximately 600 basis points.
This advertising softness is attracting scrutiny as Spotify has increasingly positioned its ad business as a critical growth engine alongside premium subscriptions.
Second-quarter revenue guidance of €4.8 billion came in essentially flat compared to the €4.77 billion consensus, providing minimal comfort regarding profitability trends.
Continued AI Development
Spotify has been integrating artificial intelligence capabilities throughout its ecosystem. The company expanded its AI DJ voice functionality, introduced AI Playlist enabling natural-language playlist generation, and recently extended its Prompted Playlist capability to encompass podcasts.
Executive restructuring occurred at the beginning of 2025. Founder Daniel Ek transitioned to executive chairman in January, with Gustav Soderstrom and Alex Norstrom assuming operational leadership.
Spotify faces competition from Apple and Amazon in the music streaming market.
SPOT shares declined approximately 12% in premarket activity following the earnings release, before stabilizing around 8% lower when regular trading commenced.
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