Synopsis
Spotify's second-quarter outlook falls short of expectations. The Swedish streaming giant anticipates slower growth in Europe and North America. This forecast has led to a dip in its stock value. The company is investing in AI features and marketing. Spotify expects operating income below analyst estimates for the upcoming quarter.The company has in recent years tried to boost profitability through price hikes and cost-cutting efforts, as well as AI features that improve discovery and engagement on its platform.
Led by Gustav Soderstrom and Alex Norstrom after founder Daniel Ek became executive chairman in January, Spotify competes with rival products from Apple and Amazon.
Co-CEO Soderstrom told Reuters that Spotify was investing heavily in new features, including marketing efforts and the computing power needed for AI, rather than expanding its workforce.
The company expects operating income of 630 million euros ($736.41 million) for the second quarter, below LSEG-compiled analysts' average estimate of 684 million euros.
That contrasted sharply with Spotify's record operating income of 715 million euros in the first quarter, which beat estimates of 681.6 million euros, driven by lower payroll taxes.
Such taxes, called social charges, are tied to the value of the company's share price, as lower stock prices can lead to a decline in charges. Spotify shares have fallen around 15% this year after rising about 30% in 2025.
CFO Christian Luiga said Spotify is going to ship "a lot of features" during the middle of this year, driving up operating expenses over the next couple of quarters.
AI features Spotify has rolled out include adding voice interaction to its personalized music tool AI DJ and introducing AI Playlist for generating playlists using natural-language prompts.
Earlier this month, the company also expanded its Prompted Playlist feature, which lets users create playlists based on their listening habits, to include podcasts.
Its monthly active users forecast of 778 million exceeded estimates of 773 million, while its prediction for a 6 million increase in premium subscribers to 299 million was below estimates of 302 million.
Premium subscribers rose 9% to 293 million in the first quarter. Its MAU net additions of 10 million brought the total to 761 million.
($1 = 0.8555 euros)
