Spotify Shares Jump After Strong Earnings Report
The music streamer's share price jumped by an impressive 14.53% after announcing the guidance beating results of its Q2 earnings report.
July 27, 2022

Spotify (NYSE: SPOT) saw its share price jump by 14.53% this morning after it announced it had beaten its earlier forecasts. Unlike Netflix (NASDAQ: NFLX) -- which reported a fall in subscribers -- Spotify grew its premium subscriber base by 14% year-over-year (YoY) to 188 million, beating its guidance of 187 million subscribers. This was just one of many metrics the company outperformed on, resulting in a huge jump in its share price.

What were the key facts and figures in Spotify's earnings report?

Spotify reported that total revenue for the quarter grew by 23% from the previous year to EUR2.86 billion. This was split between premium sales -- increasing by 22% YoY to EUR2.5 billion -- and advertising revenue, which grew by 31% to EUR360 million. Advertising revenue reached an all-time high, as a percentage of total revenue, at 13%.

Monthly Active Users (MAUs) were up 19% from the previous year to 433 million, which was 5 million above the company's earlier guidance. This record increase in MAUs was led by successful marketing campaigns in the Rest of World segment, reactivations in Europe, and Gen Z strength in Latin America. 

Spotify missed its gross margin forecast of 25.2% and instead reported a margin of 24.6% due to higher spending on non-music content and its decision to end the production of Car thing -- a smart player accessory for cars. However, it has reset the 25.2% target margin for the third quarter. 

The company's net loss per diluted share of EUR0.85 was also wider than a targeted net loss per share of EUR0.72. Spotify claims this was due to higher personnel and advertising costs, currency movements, and acquisitions of Podsights, Chartable, Whooshka, and Findaway. The company also expects to reduce headcount growth to 25% in Q3 while investigating marketing activity.

The company plans to accelerate its expansion into audiobooks after seeing the success of podcasts. At the end of Q2, Spotify had 4.4 million podcasts on its platform, up from 4 million in the first quarter. MAUs engaging in podcasts grew by high double digits over the prior year, while per-user podcast consumption rates continued to rise. Spotify sees podcasts as a growth driver for its advertising revenue segment. 

What impact did the results have on Spotify's share price?

After the strong earnings result, Spotify's share price jumped by 14.53%. This comes as a relief to investors who have seen the value of their holdings fall by 50.84% since the start of the year and by 67.18% since its all-time high in February 2021. 

However, analysts remain skeptical as they believe the large sums Spotify has paid to expand into podcasting are not sustainable. For example, the company has a $200 million multi-year contract with Joe Rogan. They also point to the company's years of loss-making, which could further hurt its financial strength and share price if the world enters a recession. 

At the time of writing, EUR1 was equivalent to $1.01. 

The Home of Successful Investing.

© 2024 MyWallSt Ltd. All rights reserved.







This website is operated by MyWallSt Ltd (“MyWallSt”). MyWallSt is a publisher and a technology platform, not a registered broker-dealer or registered investment adviser, and does not provide investment advice. All information provided by MyWallSt Limited is of a general nature for information and education purposes, and you should not construe any such information as investment advice. MyWallSt Limited does not take your specific needs, investment objectives or financial situation into consideration, and any investments mentioned may not be suitable for you. You should always carry out your own independent verification of facts and data before making any investment decisions, as we cannot guarantee the accuracy or completeness of any information we publish and any opinions that we publish may be wrong and may change at any time without notice. If you are unsure of any investment decision you should seek a professional financial advisor. MyWallSt Limited is not a registered investment adviser and we do not provide regulated investment advice or recommendations. MyWallSt Limited is not regulated by the Central Bank of Ireland. MyWallSt Limited may provide hyperlinks to web sites operated by third parties. Your use of third party web sites and content, including without limitation, your use of any information, data, advertising, products, or other materials on or available through such web sites, is at your own risk and is subject to the third parties' terms of use.