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Shares in music streaming platform Spotify tumbled 9% after the open in New York on Wednesday, after the company’s first-quarter earnings showed signs that user growth is slowing amid heightened competition from Big Tech rivals.
Spotify
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added 3 million premium subscribers in the first three months of 2021, but missed expectations on the number of monthly active users and lowered its guidance for monthly users across the full year.
The Stockholm, Sweden-based company said that monthly active users — a key metric — grew to 356 million in the first three months of 2021, a 24% rise compared with the same period in 2020. This figure neared the bottom of the company’s previously guided range of 354 million to 364 million, and in a statement Spotify said it was “modestly below our internal expectations.” The metric also missed Wall Street expectations of a figure above 360 million, based on the FactSet consensus.
Growth was better among users paying for Spotify’s advertising-free service. Spotify added 3 million of these users in the first quarter to hit 158 million premium subscribers, a 21% increase from the same period in 2020. This slightly beat the Wall Street consensus of 157 million premium subscribers.
Also read: Spotify is raising prices on many U.S. and U.K. subscriptions this week
But there are signals that growth is slowing, as Spotify faces heightened competition from Big Tech rivals edging in on the music streaming group’s business.
The company said it expects monthly active users in the second quarter of 2021 to be within a range of 366 million to 373 million, disappointing Wall Street, which had expected a figure close to 378 million. Spotify expects a range of 162 million to 166 million premium subscribers in the second quarter, setting the bar high to meet the Wall Street consensus of 166 million.
Spotify also lowered its full-year guidance for monthly active users, saying that it now expects to have between 402 million and 422 million, after projecting a range of 407 million to 427 million at the end of the fourth quarter. However, the group’s guidance on premium users remains unchanged, and it hiked its expectations for full-year revenue slightly.
“Given the extraordinary operating circumstances we currently face with respect to the impact of COVID-19, there is a greater likelihood of variances with respect to those ranges than typical quarters,” the company said.
Plus: Apple to face landmark antitrust charges over Spotify complaint this week, according to reports
Spotify saw breakneck user growth through the COVID-19 pandemic as millions of housebound people turned to entertainment on digital platforms. But the group faces increasing pressure from larger rivals in Big Tech such as device maker Apple
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and online retailer Amazon
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A pioneer in music streaming, Spotify is also pushing into podcasts. Spotify said that the number of hours users listened to podcasts rose strongly from the fourth quarter of 2020, with podcast activity in March hitting an all-time high in terms of the share of overall listening hours.
The group said “The Joe Rogan Experience” podcast in particular performed above expectations with regard to bringing in new users. “Renegades: Born in the USA,” which features former President Barack Obama and musician Bruce Springsteen, was the second-largest Spotify podcast in March and its most international show to date, the company said.
In core financial metrics, Spotify on Wednesday reported revenues of €2.1 billion in the first quarter, a 16% rise from the same period last year but a 1% decline from the fourth quarter of 2020. The company had a net income of €23 million in the quarter, up from €1 million in the same period last year.
