Spotify stock falls on revenue miss, lackluster guidance

Spotify shares dropped about 5% before the bellTuesday after the music streaming platform fell short of Wall Street's expectations and posted weak guidance for the current quarter.

Here's how the company did versus LSEG estimates:

• Loss: Loss of .42 euros vs earnings of 1.90 euros per share expected
• Revenue: 4.19 billion euros vs. 4.26 billion expected

The Sweden-based music platform's revenues rose 10% from about 3.81 billion euros in the year-ago period. The company posted a net loss of 86 million euros, or a loss of .42 euros per share, down from net income of 225 million euros, or 1.10 euros per share a year ago.

Spotify said that higher personnel, marketing and professional services costs and 115 million euros worth of what it called social charges contributed to the results.

Third-quarter guidance came up short of Wall Street's forecast.

The company expects revenues to reach 4.2 billion euros, compared to a 4.47 billion euro estimate from StreetAccount. Spotify said the forecast accounts for a 490-basis-point headwind due to foreign exchange rates.

Monthly active users on the platform jumped 11% to 696 million, while paying subscribers rose 12% from a year ago to 276 million.

For the current quarter, Spotify said it expects to reach 710 million monthly active users, with 14 million net adds. The company expects 5 million net new premium subscribers in the third quarter to reach 281 million subscriptions.

During the period, Spotify said it rolled out a request feature for its artificial intelligence DJ. The company said engagement with the offering has roughly doubled over the last year.

Earlier this year, an indie rock band on the platform known as Velvet Sundown gained media attention after it quickly captured over a million new listeners and raised questions over artificial intelligence use in music creation. The "band" was later confirmed to be mainly AI-generated after widespread speculation.

In 2024, Spotify posted its first full year of profitability. Shares are up 57% this year. Spotify said it ended the quarter with more than 7,300 full-time employees.