Q1 2025 Update April 29th, 2025 Table of Contents Executive Summary p.03 | Key Highlights | p.04 | | --- | --- | | Financial Summary | p.06 | | MAUs & Subscribers | p.13 | | Product & Platform | p.16 | | Outlook | p.19 | Financial Statements 2 p.22 Executive Summary We are pleased with our performance in Q1, as nearly all of our KPIs were in-line to ahead of guidance. The business added 3 million MAU during the quarter, in-line with our expectations for a seasonally small quarter, while Subscriber net addit ...

Subscriber Growth - Spotify's premium subscriber base increased by 5 million in Q1, a 12% year-over-year growth, totaling 268 million subscribers, marking the second-highest total ever and the highest net addition for a first quarter since 2020 [1] Financial Performance - The company reported a record-high quarterly operating income of €509 million (approximately $528 million), although this was below the guidance of €548 million ($625 million) [2] - Total revenue rose by 15% year-over-year to €4.2 billion ($4.8 billion) [2] - The operating income for the previous quarter was €477 million ($509.48 million) [3] Market Position and Competitive Landscape - Spotify continues to be a leading player in the music streaming industry, outperforming competitors like Apple Music and Amazon Music [4] - The company is expanding into video podcasts, with 330,000 shows available on the platform, and has launched the Spotify Partner Program, which paid out over $100 million to podcast creators in Q1 [4] Product Innovations - Spotify has introduced its AI Playlist feature to over 40 markets, including countries such as the Bahamas, Fiji, Ghana, Jamaica, Kenya, and Singapore [5]

Core Insights - Spotify reported revenue of $4.41 billion for Q1 2025, an 11.7% year-over-year increase, but fell short of the Zacks Consensus Estimate of $4.6 billion, resulting in a surprise of -4.08% [1] - The company's EPS for the quarter was $1.13, compared to $1.05 a year ago, but this also missed the consensus estimate of $2.29, leading to an EPS surprise of -50.66% [1] Key Metrics - Total Monthly Active Users (MAUs) reached 678 million, slightly below the average estimate of 678.34 million [4] - Ad-Supported MAUs were reported at 423 million, compared to the average estimate of 426.42 million [4] - Premium Subscribers totaled 268 million, exceeding the average estimate of 265.41 million [4] Stock Performance - Spotify's shares have returned +8.7% over the past month, outperforming the Zacks S&P 500 composite, which saw a -0.8% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Spotify reported strong growth in Q1 2025, with revenue increasing by 16% year-over-year to 4.2 billion euros and premium subscribers rising by 12% to 268 million [2][3] - Despite revenue growth, earnings per share (EPS) of 1.07 euros missed Wall Street expectations due to higher-than-expected employment taxes [4][6] - The company continues to show strong operating metrics, with average revenue per user increasing by 4% to 4.73 euros and overall gross margin improving to 31.6% [5] Financial Performance - Revenue for Q1 2025 was 4.2 billion euros, up from 3.6 billion euros in Q1 2024, reflecting a 16% increase [2] - EPS for Q1 2025 was 1.07 euros, a 10% increase from 0.97 euros in Q1 2024, but fell short of expectations [2][4] - Premium subscribers grew to 268 million, up from 239 million, marking a 12% increase [2][3] - Free cash flow more than doubled to 534 million euros, a 158% increase from the previous year [2][5] Market Reaction - Following the earnings report, Spotify's share price dropped by 6% in early morning trading [6] - The earnings miss due to tax-related costs has raised concerns among investors [6] Future Outlook - Spotify anticipates total users to reach 689 million in the current quarter, slightly below expectations, while premium subscribers are expected to grow to 273 million, slightly above expectations [8] - The company remains optimistic about continued growth in 2025 despite potential headwinds such as consumer spending slowdowns and currency volatility [7][8]

Group 1 - Spotify reported Q1 revenue of €4.2 billion ($4.8 billion), a 15% year-over-year increase, meeting guidance and analyst expectations [1] - Operating profit was €509 million, below the expected €548 million, impacted by over €76 million in social costs related to employee wages and benefits [1] - Subscription users grew by 12% to 268 million, exceeding analyst expectations of 265.2 million, with Q2 user forecast at 273 million [1] Group 2 - CEO Daniel Ek expressed confidence in the long-term outlook despite short-term challenges, stating the company's direction is clearer than ever [1] - Monthly active users increased by 10% to 678 million, slightly below analyst expectations of 679 million, with Q2 forecast at 689 million [1] - Analysts noted that despite uncertainties, competitive advantages are strengthening, with positive long-term prospects driven by potential price increases and new features [2] Group 3 - Spotify is expanding into audiobooks and podcasts, recently entering the video content space to compete with YouTube [2] - The company has launched a new partnership program compensating creators based on content consumption rather than advertising, paying $100 million to podcast publishers and creators since the start of the year [2] - The music industry is experiencing a slowdown, prompting record labels to seek new revenue streams from artists, while Spotify is developing a higher-priced "Music Pro" package [3] Group 4 - Following the earnings report, Spotify's stock initially dropped over 8% in pre-market trading but later narrowed the decline to 5% [3] - As of March 31, the company's stock had risen 22% year-to-date, with a more than 100% increase over the past 12 months [3]

Group 1 - Spotify's Q1 revenue was €4.19 billion, slightly below market expectations of €4.21 billion [1] - The Q1 gross margin was 31.6%, exceeding market expectations of 31.5% [1] - The number of monthly active users in Q1 reached 678 million, slightly below the market estimate of 679.04 million [1] - Total paid subscribers in Q1 were 268 million, surpassing market expectations of 265.22 million [1] Group 2 - Q1 earnings per share were €1.07 [2] - For Q2, the expected monthly active users are 689 million, below the market estimate of 694.38 million [2] - Projected Q2 revenue is €539 million, lower than the market expectation of €553.2 million [2] - Expected total paid subscribers for Q2 are 273 million, slightly above the market estimate of 271.41 million [2] Group 3 - Spotify's stock dropped over 6% in pre-market trading [3]

Core Viewpoint - Spotify Technology S.A. is expected to report strong earnings growth in Q1 2025, with earnings per share estimated at $2.32, reflecting a 121% year-over-year increase, and revenues projected at $4.5 billion, indicating a 13.3% growth compared to the previous year [1]. Earnings Estimates - The Zacks Consensus Estimate for Q1 earnings has seen two upward revisions and one downward revision in the past 30 days, with a 1.3% increase in the 2024 earnings estimate during the same period [2]. - The current earnings estimates for Q1, Q2, E1, and F2 are $2.32, $2.44, $10.55, and $13.56 respectively, showing a positive trend in revisions over the last 60 days [3]. Earnings Surprise History - Spotify has a notable earnings surprise history, surpassing the Zacks Consensus Estimate in two of the last four quarters, with an average positive surprise of 22% [4]. Earnings Prediction Model - The current Earnings ESP for Spotify is -8.61%, and it holds a Zacks Rank of 3 (Hold), indicating that the model does not predict a definitive earnings beat this time [5][6]. Subscriber Growth - The growth in subscribers and monthly active users (MAU) is expected to positively impact both revenue and earnings, with total MAUs estimated at 678.3 million (10.3% year-over-year growth), ad-supported MAUs at 426.4 million (10% growth), and premium subscribers at 265.41 million (11% growth) [8]. Stock Performance - Spotify's stock has experienced significant price increases, rallying 35% year-to-date, 58% over the past six months, and 109% in the past year, indicating a strong upward trend [9]. Investment Considerations - The company's strong performance metrics are attributed to price hikes, a loyal consumer base, and cost reductions, which have contributed to growth in both top and bottom lines [10]. - The expectation is for another robust quarterly performance driven by subscriber gains and increases in average revenue per user (ARPU), which will enhance the company's financial position [11]. Long-term Outlook - While current growth prospects for Spotify appear strong, there may be a potential correction in the stock price, suggesting that investors might consider waiting for a more opportune moment to invest [12]. - The long-term growth potential of the company remains strong, making it a stock to monitor for future investment opportunities [14].

Core Viewpoint - Marc Mysterio is intensifying his legal battle against Amazon Music and DistroKid, alleging that a shadowban has suppressed his music's visibility, resulting in significant financial losses [2][5]. Legal Allegations - Mysterio's legal team claims that Amazon Music employed a filter that erased his artist metadata, which they argue is similar to Amazon's conditional logic filters used in previous cases [3][4]. - The alleged filter replaced Mysterio's name with a dash, rendering his songs "artist-less" and invisible on music stations, disconnecting him from 1.25 million fans and 55% of his streams [4]. Streaming Impact - Mysterio experienced a drop in streams from over 80 million to near zero by September 16, 2024, with evidence presented in a YouTube series showing streaming errors and a lack of songs in his station mix [5]. - The drop included over 3.7 million streams on Taylor Swift's Amazon Artist Station, indicating a broader impact on his visibility and revenue [5]. Evidence and Demands - Mysterio's legal team has requested 17 categories of evidence from Amazon, including metadata logs, to expose the activation of the alleged filter [7]. - The restoration of Mysterio's 'Related Artists' section by Amazon post-lawsuit is cited as evidence of their control, yet he claims the shadowban persists [7]. Industry Implications - The case raises concerns about data manipulation by Amazon, potentially undermining independent charts like Billboard's Hot Dance/Electronic Songs [8]. - Mysterio calls for solidarity among artists, urging figures like Taylor Swift to support his cause against platform suppression, framing it as an existential battle for creators [8]. Artist Background - Marc Mysterio is a Billboard-charting artist with over 80 million streams and 1.25 million fans on Amazon Music, known for collaborations with notable artists [9]. - He is also an undefeated boxer and has publicly challenged Jake Paul, further increasing his visibility in both music and sports [9].

Core Insights - Spotify is experiencing a significant outage affecting many users who are unable to load the app [1] - The company acknowledged the disruption on social media, stating they are investigating the issues [1] - Downdetector reported thousands of outage reports and user comments expressing frustration [1] Company Response - Spotify confirmed awareness of the issues and is actively checking them out [1] - User reactions on social media indicate a strong demand for the service, with comments highlighting the urgency for background music [1] User Impact - The outage has led to a considerable number of reports on Downdetector, indicating widespread user impact [1] - Comments from users reflect a mix of frustration and humor regarding the service disruption [1]

Core Viewpoint - Marc Mysterio has publicly called on Taylor Swift to withdraw her music catalog from Amazon Music due to alleged unpaid royalties and digital suppression affecting his music career [1][3]. Group 1: Allegations Against Amazon Music - Mysterio claims he is owed millions for over 80 million streams, including nearly 4 million from Swift's Amazon Music artist station, while facing a shadow-ban that has disconnected him from his 1.25 million fans [1][6]. - He alleges that Amazon's refusal to pay and only partial fixes demonstrate an intent to suppress his music, as they did not remove the shadow-ban despite acknowledging some issues [6][8]. Group 2: Mysterio's Demands - Mysterio's demands include full payment for all streaming activity tied to his ASIN, immediate removal of the shadow-ban, and a direct line of communication with Swift to discuss the situation [7][8]. - He references Swift's history of taking a stand against unfair pay, suggesting that her withdrawal from Amazon Music could pressure the platform to address his claims [5][8]. Group 3: Personal Connection - The appeal to Swift is based on their mutual connection through WWE Hall of Fame wrestler Jeff Jarrett, who was a friend to both artists [2][5]. - Mysterio emphasizes the importance of Swift's influence in the industry and her previous actions to support artists' rights, hoping she will advocate for him in this situation [3][5].