Spotify's high payroll taxes hurt profit, shares slide
Spotify forecast second-quarter profit below market estimates on Tuesday due to employee salary-related taxes, taking the shine off its strong subscriber growth and sending the shares of the Swedish music-streaming giant down 6 per cent before the bell.
The company's profitability is closely watched by investors looking for signs that it can bolster margins after years of prioritizing user growth.
While cost-cutting initiatives and price increases have aided profit in the recent quarters, its latest earnings took a hit from taxes tied to higher salaries and benefits that jumped sharply due to a rise in the company's stock price.
Spotify took 76 million euros ($86.47 million) in charges in the first quarter, offsetting lower marketing costs and weighing on its operating profit of 509 million euros, which was below estimates of 518.2 million euros, according to data compiled by LSEG.
Its second-quarter profit forecast of 539 million euros includes 18 million euros in payroll taxes, and was below estimates of 557.5 million euros.
Still, strong subscriber growth showed that efforts to draw users with more video content and AI-powered services, including playlists generated with a simple written prompt, were working.
Premium subscribers rose 12 per cent to 268 million in the first quarter, beating Visible Alpha estimates of 265.3 million. The company had 678 million monthly active users, above estimates of 671.9 million.
CEO Daniel Ek told Reuters the company was focused on "adding various higher price point tiers" for those who want all the benefits.
He said a large share of new subscribers came from Latin America and the Asia-Pacific, regions he expects will power Spotify's long-term growth.
It expects monthly active users to rise to 689 million in the second quarter, compared with LSEG-compiled estimates of 684.9 million. Premium subscribers are expected to increase to 273 million, above Visible Alpha estimates of 271.5 million.
First-quarter revenue rose 15 per cent to 4.19 billion euros, slightly below LSEG-compiled estimates of 4.20 billion euros. Spotify forecast second-quarter revenue of 4.3 billion euros, in line with estimates.
Spotify's shares have risen about 34 per cent so far this year.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
3 days ago
- CNA
Broadcom forecasts quarterly revenue above estimates
Broadcom forecast third-quarter revenue above Wall Street estimates on Thursday, betting on strong demand for its networking and custom AI computing chips. The company expects revenue of around $15.80 billion, compared with analysts' average estimate of $15.71 billion, according to data compiled by LSEG.
Business Times
4 days ago
- Business Times
Thailand to buy 12 Swedish Gripen fighter jets, air force says
[BANGKOK] Thailand plans to acquire a dozen Gripen JAS 39 fighter jets built by Sweden's SAAB over 10 years to replace its ageing fleet of mainly US aircraft, the air force chief said on Wednesday (Jun 4), two years after Washington denied its request to buy F-35s. Thailand has one of South-east Asia's best-equipped air forces, with 11 JAS 39 Gripen jets and dozens of American F-16 and F-5 aircraft, some of which have been in operation since the late 1980s. The budget for the first procurement phase from 2025 to 2029 is 19.5 billion baht (S$768.5 million) for four Gripen jets, Air Chief Marshal Punpakdee Pattanakul said. The air force, which had said last year that it wanted to buy more Swedish jets, said it would send the plan to cabinet for approval next month. If approved, the contract was expected to be signed in August. 'We welcome the Royal Thai Air Force's selection of Gripen E/F as its future fighter and look forward to the next steps in this procurement process,' SAAB CEO Micael Johansson said in a statement. 'Gripen E/F is the best solution to provide Thailand with independent airpower for the future which will contribute significantly to the nation's safety and security,' he said. The Swedish company said it had not signed a contract nor received a firm order yet. Thailand, which has a long history of military cooperation with the United States and was designated a Major Non-Nato Ally by Washington in 2023, had initially sought as many as eight Lockheed Martin F-35 stealth jets, among the world's most advanced fighter aircraft. But the United States in 2023 declined to sell them over what Bangkok said were issues with training and technical requirements, including maintenance compatibility. The F-35 is considered a sensitive export sold only to the United States' closest allies, which in the Indo-Pacific include Australia, Japan, South Korea and Singapore. REUTERS
Business Times
6 days ago
- Business Times
Digital banking startup Chime targets US$11.2 billion valuation in US IPO
[BENGALURU] Digital banking startup Chime Financial said on Monday (Jun 2) it was targeting a valuation of up to US$11.2 billion on a fully diluted basis in its long-awaited New York initial public offering, underscoring the growing momentum in the new listings market. San Francisco, California-based Chime and some of its existing shareholders are seeking to raise up to US$832 million by offering 32 million shares priced between US$24 and US$26 apiece. Chime is offering 25.9 million shares in the offering, while certain shareholders, including venture capital firm Cathay Innovation, are putting up 6.1 million shares. The US IPO market has sprung back to its feet after a disappointing April as equities rebounded amid easing volatility, paving the way for companies to go public after tariff-driven chaos shut the window for weeks. Recent listings, including retail trading platform eToro, have been well-received by investors. Analysts say the stage is set for a broader IPO pickup, but stability needs to last longer before the window fully reopens. 'Momentum is building after the tariff-related volatility. Right now, investors want to see fundamentally strong companies with attractive valuations,' said Matt Kennedy, senior strategist at Renaissance Capital, a provider of IPO-focused research and ETFs. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Chime, founded in 2012, offers banking products such as checking and high-yield savings accounts through its app. The company mainly generates revenue when its members spend using Chime-branded debit and credit cards. Chime raised US$750 million in a 2021 funding round at a US$25 billion valuation. Its major backers include Yuri Milner's DST Global, private equity firm General Atlantic and investment firm ICONIQ. Fintech revival? Financial technology listings have slowed down since the pandemic-era boom as interest rates rose and inflation surged. Swedish fintech giant Klarna paused its US IPO plans earlier this year as tariffs rattled global markets. A successful IPO for Chime could pave the way for other fintech companies that have recently considered tapping public markets. Chime's IPO valuation target represents prudence in giving buyers a decent discount to encourage participation, said Samuel Kerr, head of equity capital markets at Mergermarket. 'As the largest deal to test the market since 'Liberation Day,' Chime will be a fascinating case study.' Morgan Stanley, Goldman Sachs and JPMorgan are the lead underwriters for the IPO offering. Chime will list on the Nasdaq under the symbol 'CHYM'. Chime plans to use a portion of its IPO proceeds to settle tax obligations related to employee-restricted stock units. REUTERS
