New York, United States | AFP | Spotify shares took a hit Thursday after a disappointing growth outlook offset the first-ever quarterly profit posted by the streaming music sector leader.
Shares in the Swedish-based music group slid 5.7 percent to close at $141.16 after the company’s third quarter earnings report.
Spotify said the number of paid “premium” subscribers rose to 87 million in the quarter, and it posted a first-ever profit of 43 million euros ($49 million) as a result of a tax adjustment.
Total revenue was $1.35 billion, up 31 percent from a year ago, largely in line with forecasts.
But Spotify’s growth outlook was weaker than expected, forecasting revenue increases of between 18 and 35 percent in the coming quarter.
It said it expected total users to rise 24 to 29 percent to between 199 and 206 million, with premium subscriptions growing to between 90 and 96 million.
Jeff Wlodarczak of Pivotal Research said he remained positive on Spotify despite the “modest reduction” in the outlook.
“Ultimately, we expect most consumers to move to subscription streaming all-you-can-eat model for music consumption,” the analyst said in a research note.
“While clearly there are risks to the Spotify story (mainly around Apple and to a lesser extent Google in streaming) the reality is that we are still in the early days of streaming,” Wlodarczak added.
“Spotify operates what we view as the most attractive streaming service with a heavy investment in discovery differentiating the service.”
Spotify is in fierce competition with its rivals offering both subscription-based and ad-supported music services.
These include Apple, Google-owned YouTube and Pandora, which is being acquired by SiriusXM.
Apple, set to release its quarterly results later Thursday, has most recently said it has 50 million subscribers for its music service.
Spotify said this week it would offer US premium subscribers a free Google Home Mini to enable them to listen more easily in their homes, a move expected to cut into its revenues.