Spotify said on Wednesday that its total number of monthly active users rose 19% to a record 422 million in the first quarter ended March 31 — above the company’s guidance by 4 million —, and it saw a jump in advertising income. In its letter to shareholders, it said the business “benefited from outperformance in Latin America and Rest of World, led by Indonesia, Brazil, and Mexico.”The company also pointed out that “MAU growth was particularly strong in our Gen Z audience, fueled by successful product feature launches such as our Lyrics experience, as well as marketing and content initiatives.”
A service outage in March caused some users to be involuntarily locked out of the service, prompting about 3 million to create new accounts to log back in. Excluding this anomaly, monthly active users would have reached 419 million.
Premium subscribers, who account for most of the company’s revenue, rose to €182 million from €158 million in the previous quarter, while advertisement-supported revenue rose 31% to €282 million.
The Swedish company posted a 24% increase in first-quarter revenue to €2.66 billion ($2.82 billion). Analysts on average had expected revenue of 2.62 billion euros, according to IBES data from Refinitiv.
After the good news, the bad ones: Spotify expects operating loss in the next quarter
Despite the forecast-beating rise in first-quarter revenue, Spotify said currency moves and a big increase in hiring would push it to an operating loss in the second quarter, sending the streaming giant’s shares down 11% on Wednesday.
“Spotify’s got to spend in order to continue attracting new users,” said Hargreaves Lansdown analyst Laura Hoy. “But there’s no way around the fact that such steep losses will eventually start eating into the group’s sturdy cash position.”
The company predicted it would make an operating loss of €197 million ($208 million) in the current quarter, but said investments would position it for growth in the decade ahead.
The company has bet big on podcasts, investing over a billion dollars in acquiring shows such as The Joe Rogan Experience and other businesses in a bid to draw users to a growing non-music audio segment. Spotify said listening reached a record in the quarter, as members choose from among 4 million podcasts.
“Overall podcast consumption is strong and increasingly sticky,” said CEO Daniel Ek during the investor call. The company said in its letter to investors it “saw a double-digit Y/Y increase in new podcasts across key growth markets in Latin America and the Rest of the World, with more than 85% of new podcast creation occurring on our Anchor platform.”
A backlash over Rogan’s podcast, in which he was accused of spreading misinformation about COVID-19 and criticized for his use of racial epithets, did not translate to a net loss of listeners or subscribers.
“The Joe Rogan controversy that rocked Spotify this February now feels like a hiccup on the company’s ascension to top global streaming audio platform,” said Forrester analyst Kelsey Chickering, noting that its share of the audio streaming market was twice the size of Apple Music.
The company now expects total monthly active users of 428 million in the second quarter, a number that reflects a loss of about 5 million monthly listeners because of the decision to suspend service in Russia.
It forecasts second-quarter revenue of €2.8 billion, compared with slightly higher estimates of €2.81 billion before.