Spotify reported on Wednesday morning it added 8 million new paying customers during the second quarter, topping analyst estimates, but at the same time fell short of Wall Street’s Q2 revenue expectations. The music streamer’s share price — which has leaped in recent months, following the signing of exclusive podcast deals with Joe Rogan and Kim Kardashian — dropped about 4.5% in premarket trading after its Q2 report was posted.
Paying active users hit 138 million overall by the end of June, Spotify reported, coming in higher than the 136-137 million paying customers analysts had anticipated the Stockholm-based company would report. Spotify’s premium subscribers increased 27% from the same time a year ago. For comparison, Spotify’s chief rival, Apple Music, reported it had 60 million paying customers in June 2019, the last time it shared an update. Monthly active users increased 31% year-over-year to 299 million.
Spotify failed to top analyst projections for sales, however, with the company reporting revenue of €1.89 billion, or about $2.22 billion, compared to expectations of €1.92 billion in Q2 revenue. Sales increased 13% year-over-year, although ad revenue of €131 million was down 20% from the same time last year. Spotify, after posting a small profit during Q1, saw its net loss surge to €356 million, or €1.91 per share; analysts had projected a loss of €0.35.
The greater-than-expected loss was attributed to social charges, which includes payroll taxes, benefits and stock compensation, per Spotify’s report.
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After warning the service had seen a “modest” drop in consumption due to the coronavirus pandemic at the end of the first quarter, Spotify on Wednesday, in its letter to shareholders, said “global consumption hours have recovered to pre-COVID levels.”
As mentioned above, Spotify’s stock price dropped to $254.20 in premarket trading — about $45 below its all-time high, hit earlier this month.
“Our business performed well in Q2 and continues to operate at a high level despite the continuing uncertainty surrounding the Covid-19 pandemic,” Spotify added in its letter to shareholders. “Excluding the impact of social charges related to the increase in our share price during Q2, all of our key metrics would have finished at or ahead of our expectations. Our liquidity position and free cash flow remain strong, and we are encouraged with the underlying trends of the business.”
Spotify’s Q2 was highlighted by signing Rogan and Kardashian, as well as DC Comics, to exclusive podcast deals. (You can read more about Spotify’s ambitious podcast goals by going here.) Investors have enthusiastically signed off on Spotify’s podcast push recently, with Spotify’s stock price running from $175 per share on May 19 – the same day it signed Rogan — to $267 per share at Tuesday’s closing bell. The company said podcasts continued to win over more Spotify users during Q2, with 21% of monthly users engaging with podcasts during the quarter, up from 19% of MAUs the previous quarter.
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Spotify said that while markets like Latin America saw slower Q2 growth in April and May, by June “things rebounded significantly,” indicating Spotify could be working through any pandemic-related decline. Looking ahead, Spotify projected it would have between 140 to 144 million paying customers by the end of the third quarter.