April 28 (Reuters) – Spotify forecast second-quarter earnings and premium subscribers below estimates on Tuesday, a sign of slowing growth in the Swedish streaming giant’s major markets of Europe and North America, sending its shares down 12% in premarket trading.
Investors closely monitor Spotify’s profitability after price hikes and cost-cutting efforts in recent years, as the company aims to improve discovery and engagement by adding more artificial intelligence features on its platform.
Spotify, led by Gustav Soderstrom and Alex Norstrom after founder Daniel Ek became executive chairman in January, competes with rival products from Apple and Amazon.
The company expects operating income of 630 million euros ($736.41 million) for the second quarter, below LSEG-compiled analysts’ average estimate of 684 million euros.
That contrasted sharply with Spotify’s record operating income of 715 million euros in the first quarter, which beat estimates of 681.6 million euros, driven by lower payroll taxes.
Such taxes, called social charges, are tied to the value of the company’s share price, as lower stock prices can lead to a decline in charges. Spotify shares have fallen around 15% this year.
Spotify rolled out AI features in recent years by adding voice interaction to its personalized music tool AI DJ and introducing AI Playlist for generating playlists using natural-language prompts.
Earlier this month, the company also expanded its Prompted Playlist feature, which lets users create playlists based on their listening habits, to include podcasts.
Its monthly active users (MAU) forecast of 778 million exceeded estimates of 773 million, while its prediction for a 6 million increase in premium subscribers to 299 million was below estimates of 302 million.
Premium subscribers rose 9% to 293 million in the first quarter, compared with estimates of 294.5 million. Its MAU net additions of 10 million brought the total to 761 million, exceeding estimates of 756.6 million.
First-quarter revenue rose 8% to 4.53 billion euros, in line with estimates. The revenue forecast of 4.8 billion euros for the second quarter was also largely in line with estimates of 4.77 billion euros.
($1 = 0.8555 euros)
(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel)
