Spotify stock falls after Q2 earnings and revenue miss, snapping back from record highs

Spotify (SPOT) shares fell as much as 10% in early premarket trading Tuesday after the company missed second quarter earnings and revenue expectations.

The results follow a remarkable 120% rally over the past year, as the stock rebounded from 2022 lows on the back of price hikes, cost cuts, and investor enthusiasm for AI and advertising.

Spotify hit a record high of $738.45 earlier this month, but shares slid to around $635 immediately following the results.

Spotify reported second quarter revenue of €4.19 billion, missing analyst expectations of €4.27 billion, though up from €3.81 billion in the same period last year.

The company posted an adjusted loss of €0.42 per share, sharply missing forecasts for a profit of €1.97 and down from earnings of €1.33 in Q2 2024.

“Outsized currency movements during the quarter impacted reported Revenue by €104 million vs. guidance,” the company said in the earnings release. Operating income also came in below expectations, weighed down by €116 million in social charges, higher payroll and related expenses, and an unfavorable revenue mix shift.

Spotify guided to third-quarter monthly active users (MAUs) of 710 million, ahead of the 707 million analysts expected.

In Q2, MAUs rose 11% year over year to 696 million, beating estimates of 689 million. Premium subscribers grew 12% to 276 million, while ad-supported users climbed 10% to 433 million — both ahead of expectations.

“Overall, we continue to view the business as well positioned to deliver growth and improving margins in 2025 as we reinvest to support our long-term potential,” the company said.

Spotify’s massive rally has followed a sweeping business overhaul, including layoffs, leadership changes, and a pullback from costly podcast exclusivity. After spending $1 billion to build out its podcast business, the company has since scaled back and narrowed its focus. Still, it remains committed to the medium, paying over $100 million to creators in Q1 alone, including high-profile names like Joe Rogan and Alex Cooper.

At the company’s 2022 Investor Day, Spotify set seemingly lofty objectives that included long-term gross margin targets between 30% and 35%. At the time, the company had been struggling to turn a profit, with its gross margin stuck at around 25%.

Those trends began to reverse in 2024 as the company raised prices for the second time in less than a year and introduced a higher-priced audio “bundle” that includes music, podcasts, and audiobooks. It also rolled out an audiobooks-only plan and a music-only streaming tier in an effort to cater to a variety of consumers.