Key Takeaways
- Q1 earnings per share reached $3.45, exceeding Wall Street consensus by $0.51
- Q2 operating income outlook of €630M fell short of the €684M analyst consensus
- Premium subscriber projection of 299M for Q2 trailed the 302M estimate
- Advertising revenue declined 5% compared to the prior year, though showed 3% growth in constant currency terms
- SPOT shares dropped as much as 12% during premarket hours after the earnings release
While Spotify delivered better-than-expected results for the first quarter, the market’s attention quickly shifted to future performance projections — and the outlook triggered a significant selloff.
The streaming giant posted Q1 revenue of €4.53 billion, representing an 8% increase from the same period last year and matching analyst projections. Earnings per share of $3.45 surpassed expectations by $0.51. The platform’s monthly active users reached 761 million, exceeding the anticipated 756.6 million.
First-quarter operating income reached a company record of €715 million, surpassing the €681.6 million consensus estimate. This milestone was partially driven by reduced payroll tax expenses, which fluctuate with Spotify’s stock valuation — the shares have declined approximately 15% year-to-date.
Premium subscription accounts grew 9% to 293 million in the first quarter, slightly missing the 294.5 million projection, with 3 million net new additions throughout the period.
The market reaction turned negative with the second-quarter forecast.
Spotify provided Q2 operating income guidance of €630 million — significantly trailing the €684 million Wall Street expectation. This represents a considerable decline from the record-breaking Q1 performance.
The company’s premium subscriber forecast of 299 million for the second quarter also disappointed, falling below the 302 million consensus. Management projects just 6 million net subscriber additions.
Monthly active user guidance of 778 million for Q2 exceeded the 773 million estimate, indicating continued strength in the platform’s free user base.
Advertising Business Shows Weakness
The advertising segment emerged as a notable underperformer. Ad-supported revenue fell 5% year-over-year during the first quarter. When measured on a constant currency basis, revenue increased 3%, but foreign exchange headwinds reduced overall revenue growth by approximately 600 basis points.
This advertising softness is particularly noteworthy as Spotify has positioned its ad business as a key growth engine alongside its subscription model.
Second-quarter revenue guidance of €4.8 billion came in roughly aligned with the €4.77 billion analyst estimate, providing minimal comfort regarding profitability trends.
Ongoing AI Feature Expansion
Spotify continues investing in artificial intelligence capabilities throughout its ecosystem. The company expanded its AI DJ voice feature, introduced AI Playlist enabling natural-language playlist generation, and recently extended its Prompted Playlist functionality to include podcast content.
A leadership transition occurred at the beginning of 2025. Company founder Daniel Ek transitioned to the executive chairman role in January, with Gustav Soderstrom and Alex Norstrom assuming operational leadership responsibilities.
Spotify faces competition from Apple and Amazon in the music streaming market.
SPOT shares declined approximately 12% in premarket activity following the earnings announcement, and stabilized around 8% lower as regular trading commenced.
