Spotify reported it added another 6 million paying customers during Q1 — pushing the streaming giant to 130 million paying subscribers overall — but also warned it’s ad sales will take a hit as 2020 continues, due to the economic fallout from the coronavirus.
For Q1, Spotify reported revenue of €1.85 billion, or about $2 billion, which increased 22% from the same time a year ago and topped analyst projections of about $1.86 billion in sales. The music streaming heavyweight also posted a small profit of about €1 million (about $1.10 million), compared to a loss of €142 million during the first quarter of 2019.
Paying active users, as mentioned above, increased from 124 million at the end of last year to 130 million; overall the company has 286 million active users, up 31% year-over-year. Apple Music, Spotify’s chief rival, had 60 million paying customers last June, the last time it updated its subscriber count.
Spotify, in its letter to shareholders, said it saw a drop in consumption in regions that were especially hard-hit by the coronavirus outbreak, like Spain and Italy, but that it had “meaningfully recovered” in recent weeks.
“Despite the global uncertainty around COVID-19 in Q1, our business met or exceeded our forecast for all major metrics,” the company said in it letter to shareholders. “For Q2 and the remainder of the year, our outlook for most of our key performance indicators has remained unchanged with the exception of revenue where a slowdown in advertising and significant changes in currency rates are having an impact.”
Spotify reported one out of six U.S. customers who dropped their service in Q1 pointed to the coronavirus as the key reason they canceled their subscription, but that 80% of those respondents said they were likely to add their service back once the economy improved. Ad-supported revenue for Q1 came in at €1.48 billion, or down more than 30% from last year; Spotify said it had been on target to hit its ad revenue goals until March, when the pandemic upended the ad market.
Wall Street appeared to be impressed with Spotify’s quarter, even with its warning of a coronavirus-related ad revenue dent later in the year, with the company’s share price increasing 9% in pre-market trading to $152 per share.