Spotify’s Profit Outlook Disappoints as Payroll Taxes Weigh Down Earnings; Shares Drop 11%
Spotify reported a lower-than-expected profit forecast for the quarter on Tuesday, as rising payroll taxes overshadowed strong demand for music streaming. This unexpected hit to earnings sent the company’s shares tumbling 11%.
Investors have been closely watching the Swedish streaming giant’s profitability, especially after price increases and cost cuts helped it deliver its first full-year profit in 2024.
While Spotify has seen its stock more than double over the past year—driven in part by an expanded video content strategy including podcasts—this surge has triggered higher employee-related social charges. In Q2, these taxes totaled €116 million ($133.6 million), leading to a net loss of €0.42 per share, compared to a €1.33 profit in the same period last year.
Spotify expects the impact to continue into Q3, projecting operating income of €485 million—well below analyst estimates of €562 million (LSEG). Its revenue forecast also fell short at €4.2 billion versus an expected €4.48 billion.
Despite the hit to profits, Spotify reported strong user growth. Monthly active users (MAUs) reached 696 million, with 18 million new users in Q2. Premium subscribers rose 12% to 276 million, surpassing expectations, and are projected to grow by another 5 million to 281 million next quarter—above the Visible Alpha forecast of 279 million.
CEO Daniel Ek highlighted the company’s push into video content, stating, “We’ve now added more than 400,000 video podcasts… more users are watching video on Spotify.”
Overall revenue grew 10% year-over-year to €4.19 billion but fell short of expectations due to negative currency effects, which shaved off about 440 basis points.
