Profits tripled, paid subscribers up 12%, and record Q1 free cash flow — so why is Spotify sinking?
Spotify’s earnings had a lot to like, but near-term “noise” might be dampening investors’ appetite for the music streaming stock.
This morning, Spotify reported that it had 678 million monthly active users at the end of Q1, making 1 in 12 people on earth a user of the green streaming machine.
Paid subscribers to the music platform also rose 12% to some 268 million, helping drive the company’s operating profit to €509 million — more than triple the figure notched in the same quarter a year ago, as the company’s continued focus on profitability nearly makes up for years of consistent losses.
And yet, Spotify’s stock is down sharply in early premarket trading as traders ditch SPOT after comments made by the company’s CEO and a weaker user growth forecast.
In the press release detailing the Q1 results, cofounder Daniel Ek said that “the short term may bring some noise, but we remain confident in the long-term story, and the direction we’re heading in feels clearer than ever.” That comment, coupled with a forecast for monthly active users to hit 689 million in Q2, appears to be enough to shake confidence in the growth story at Spotify. Indeed, Wall Street estimates compiled by FactSet reveal that analysts were expecting Spotify to get to ~695 million monthly active users by the end of Q2.
That may not seem like a huge difference, but Spotify’s guidance implies just 2% MAU growth relative to where things were at the end of last year — a less exciting trajectory than Wall Street had anticipated.
On Monday, Spotify announced that it had already paid out more than $100 million to creators in the first quarter of 2025. Taking a leaf out of the YouTube playbook, Spotify has been doubling down on incentivizing creators to publish on the platform with revenue-sharing agreements.
More details are expected on the earnings conference call at 8 a.m. ET.
