Spotify increases user numbers, but falls short of financial expectations

Spotify was able to further increase its user numbers in the first quarter of this year and even exceeded its expectations in terms of paying subscribers. Although the revenue target was achieved, the operating profit was lower than forecast. The music streaming service is also cautious in its outlook, causing investors to initially drop the Spotify share price by almost 10 percent. Although the share price recovered over the course of the trading day, it remained slightly in the red.

However, a look at the user figures is certainly positive. Spotify recently counted a total of 678 million monthly active users, three million more than at the end of 2024 and even 10 percent more than in the previous year. It is interesting to note that the number of users who listen for free and accept advertising has recently fallen by two million to 423 million, while there are five million more paying subscribers compared to the previous quarter, now 268 million. Both market observers and Spotify itself had expected only 265.2 million paying listeners.

Significantly more revenue from subscriptions than from advertising

This also has a positive financial impact, as Spotify earns significantly more from paying customers than from advertising. This is because 90 percent of revenue in the first quarter comes from paying subscribers. This part of Spotify's revenue grew by 16 percent year-on-year to 3.77 billion euros. Overall, Spotify was able to increase its quarterly revenue by 15 percent year-on-year to 4.19 billion euros. However, advertising revenue recently fell by 22 percent to 419 million euros, meaning that total revenue was still one percent higher in the previous quarter, when Spotify became profitable for the first time in 17 years.

Spotify's bottom line also remained in the black, as net profit grew by 32 percent year-on-year to 1.33 billion euros. However, this is less than in the previous quarter when profits were up three percent. Operating profit rose by seven percent compared to the previous quarter and, according to Spotify, more than tripled year-on-year to 509 million euros. However, the music streamer itself had expected 548 million euros and thus missed this target.

Outlook cautious, but analysts hopeful

For the current second quarter of this year, Spotify expects total revenue to increase by 13 percent year-on-year. At the same time, operating profit is expected to double compared to the previous year and increase by almost six percent compared to the first quarter. The music streamer also expects user numbers to rise to 689 million, although analysts had expected growth to 694.4 million users, according to Bloomberg.

This outlook overshadows Spotify's overall positive development, which is also perceived accordingly by market observers. In particular, possible price increases and new functions such as video podcasts should ensure further growth, both financially and in terms of user numbers. Just last year, Spotify introduced music videos for premium users, thereby closing a gap to providers such as YouTube Music and Apple Music, which already display music videos.

Despite this, Spotify's share price initially suffered a setback and briefly fell by 9.6 percent on New York's Wall Street after the stock had gained 22 percent since the beginning of the year. However, the share price recovered over the course of the trading day and finally closed by less than half a percent.

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