Spotify shares rise after earnings as user growth delivers positive surprise

Spotify Technology SA topped Wall Street estimates on Tuesday with its user growth in the latest quarter, helping lift its shares in premarket action.

The music streaming company reported 602 million monthly active users in the fourth quarter, up 5% sequentially and higher than the 601 million expected by analysts tracked by FactSet. Spotify SPOT,
reported 236 million premium subscribers, up 4% from the third quarter and higher than the 235 million expected by analysts.

Spotify has defined outperformance in Latin America and the rest of the world. As for premium subscribers, the company also highlighted better-than-expected uptake of a promotional campaign.

While Spotify exceeded subscriber expectations, it posted slightly lower revenue, recording €3.67 billion in revenue, compared to €3.17 billion a year earlier. Analysts were looking for 3.72 billion euros.

The company said its 501 million euros in advertising-supported revenue marked an all-time high.

Spotify’s gross margin of 26.7% beat the company’s forecast of 26.6%.

Shares rose 5% in premarket action Tuesday.

The company reported a net loss of 70 million euros in the fourth quarter, or 36 cents per share, compared to a loss of 430 million euros, or 2.93 euros per share, in the same period a year earlier. Analysts had expected a loss of 37 cents per share.

For the first quarter, Spotify expects 618 million monthly active users, along with 239 million premium subscribers. This compares with the FactSet consensus, which called for 619 million MAUs and 238 million premium subscribers.

The company expects total revenue of 3.6 billion euros, almost unchanged from consensus. Spotify expects currency movements to have a negative impact of 250 basis points on year-over-year revenue growth.

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