Spotify Stock Plunges After Q2 Earnings - Here's Why

Spotify Technology SA SPOT stock traded lower after it reported second-quarter FY23 revenue growth of 11% year-on-year to €3.18 billion ($3.46 billion), missing the consensus of $3.57 billion. Premium Revenue grew 11% Y/Y to €2.77 billion, helped by subscriber additions.

Total MAUs (Monthly Active Users) rose 27% Y/Y to 551 million. Premium Subscribers grew 17% Y/Y to 220 million.

Within Premium, the average revenue per user (ARPU) declined by 6% Y/Y at €4.27. Ad-Supported revenue rose 12% to €404 million.

On Monday, Spotify announced it would raise subscription prices in some markets.

Margins: The adjusted gross margin improved by 22 bps to 25.5%.

Adjusted Premium gross margin was 28.4%, down 37 bps Y/Y, reflecting Marketplace growth. 

Ad-Supported adjusted gross margin was 5.7%, up 458 bps Y/Y, reflecting improving podcast profitability.

Adjusted Operating Loss was €(112) million, aided by lower marketing spend.

Loss per share of €(1.55) or $(1.69) missed the consensus loss of $(0.70).

Spotify held €3.5 billion in cash and equivalents and generated €9 million in free cash flow.

Outlook: Spotify sees Q3 revenue of €3.3 billion (consensus $3.78 billion), which includes a 600 bps hit from forex. It expects total MAUs of 572 million. Investors are reacting to the tepid MAU growth outlook.

Price action: SPOT shares traded lower by 6.55% at $153 premarket on the last check Tuesday.

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