Live Earnings Analysis: Spotify (NYSEL SPOT) Sinks After Weak Guidance

Live Updates

Live Coverage
Updates appear automatically as they are published.

Softer Than Expected Outlook

7:35 am
by Eric Bleeker

We looked into Spotify’s Q2 below, which was mixed (weak revenue and EPS last quarter, but strong free cash flow and subscriber numbers).

Let’s look at their guidance now.

The company guided to:

• 710 Million MAUs
• 281 million Premium Subscribers (an addition of 5 million net new subscribers this quarter)
• Revenue of €4.2 billion
• 31.1% gross margins
• And €485 million in operating income

The number that Wall Street will be focused on is the revenue figure which is once again broadly disappointing. Wall Street had modeled in €4.47 billion in revenue last quarter, but Spotify is guiding to €4.2 billion, which is largely flat sequentially.

Spotify (NYSE: SPOT) earnings are out, and the market doesn’t like what it sees. Shares are down 3.5% in premarket trading as of 7:25 a.m., and had traded down 5% immediately after the company’s earnings release. 

Alongside Netflix (Nasdaq: NFLX), investors had rushed to Spotify as a safe haven stock as tariffs dominated the headlines. Companies that sell subscription services that are digital are generally far more insulated from fallout during trade disputes. In addition, the company has been steadily building its subscriber base and investors have been willing to pay a higher and higher multiple for Spotify. 

Heading into today, Wall Street was expecting $9.79 in adjusted earnings this year for Spotify and the stock traded for $700.98 per share. That’s a multiple of more than 70X this year’s earnings. Looking at further, Spotify was trading for about 35X 2028 earnings. 

Any way you slice that, Spotify was trading for a premium multiple, so earnings had to be very good for the company’s stock to keep rising. 

What Did Spotify Report This Morning?

• Operating Income came in at €406 million, which was below Wall Street expectations of €481.7 million. 
• Revenue was €4.193 billion, which was below expectations of €4.265 billion 
• Free cash flow did beat, however, hitting €709 million versus expectations of €648 million.  

So, earnings were mixed. Some surface-level figures like EPS of €.42 were very disappointing, however, free cash flow was strong. In addition, subscriber growth of 8 million premium subscribers was solid and surpassed Wall Street expectations. 

The post Live Earnings Analysis: Spotify (NYSEL SPOT) Sinks After Weak Guidance appeared first on 24/7 Wall St..