Why Spotify Shares Are Crashing Today

Spotify Technology S.A. SPOT reported first-quarter FY22 revenue growth of 24% year-over-year to €2.67 billion ($2.99 billion), beating the consensus of $2.83 billion.

EPS of €0.21 ($0.24) may not be comparable to the consensus loss of $(0.25).

Premium Revenue grew 23% Y/Y to €2.38 billion, while Ad-Supported Revenue grew 31% Y/Y to €282 million.

Drivers: The monthly active users (MAU) rose 19% Y/Y to 422 million. Premium subscribers were 182 million MAUs, up 15% Y/Y. The ARPU was up 6% Y/Y for premium subscribers.

Spotify clocked the most significant Q1 ever for Ad-Supported Revenue (11% of Total Revenue) and saw Y/Y solid growth across all regions and channels. Music Ad-Supported Revenue gained from a Y/Y increase in impressions and healthy double-digit growth in CPMs.

Spotify Audience Network led podcast revenue strength and continued growth across existing Spotify studios and exclusive licensing deals. The business benefited from outperformance in Latin America and the Rest of the World, led by Indonesia, Brazil, and Mexico. MAU's growth was robust in its Gen Z audience.

Margin: The gross margin contracted 29 bps to 25.2%, reflecting a favorable revenue mix shift towards podcasts offset by increased non-music content spend. Premium Gross Margin was 28.4%, up 51 bps.

Spotify held €3.6 billion in cash and equivalents.

Deals: Spotify collaborated with Alphabet Inc GOOG GOOGL Google for User Choice Billing for greater flexibility in payment choice and forged a long-term partnership with FC Barcelona.

Nearly all of its key metrics surpassed guidance, led by MAU outperformance, healthy revenue growth, and better Gross Margin. Excluding the impact of its exit from Russia, subscriber growth exceeded expectations.

Outlook: Spotify expects Q2 revenue of €2.80 billion, total MAUs of 428 million, and total premium subscribers of 187 million

Price Action: SPOT shares traded lower by 10.2% at $99.15 on the last check Wednesday.