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- Spotify stock slides on Q2 earnings loss, weaker forecast after record rally</p>
<p>Alexandra CanalJuly 29, 2025 at 8:52 PM</p>
<p>Spotify (SPOT) stock fell as much as 10% in early premarket trading Tuesday before paring some losses. The audio giant posted a second quarter loss, missed revenue expectations, and issued softer guidance for revenue and operating income in the current quarter.</p>
<p>The results follow a remarkable 120% rally over the past year as the stock rebounded from 2022 lows, fueled by a sweeping business overhaul that included price hikes, layoffs, leadership changes, and a retreat from costly podcast exclusivity deals. Investor enthusiasm for AI and advertising has also played a key role in fueling the recent surge.</p>
<p>The stock hit an all-time high of $738.45 earlier this month but was trading closer to $650 shortly following the results.</p>
<p>Read more: Live coverage of corporate earnings</p>
<p>Spotify reported Q2 revenue of €4.19 billion ($4.86 billion), missing analyst expectations of €4.27 billion, though up from €3.81 billion a year earlier. The company posted an adjusted loss of €0.42 ($0.49) per share, missing forecasts for a profit of €1.97 and down from earnings of €1.33 in the same quarter last year.</p>
<p>"Outsized currency movements during the quarter impacted reported revenue by €104 million vs. guidance," Spotify said in its earnings release.</p>
<p>Operating income also missed expectations, weighed down by social charges, increased payroll expenses, and an unfavorable revenue mix. Guidance for the current quarter came in below Wall Street estimates, reflecting continued pressure from social charges linked to the company's share price.</p>
<p>On the earnings call, CEO Daniel Ek acknowledged the near-term weakness but reaffirmed his confidence in Spotify's long-term trajectory, saying he still expects 2025 to be a "standout year." He attributed recent user and subscriber growth to long-term initiatives launched quarters — or even years — ago, and emphasized that results aren't always immediate or within the company's control.</p>
<p>"Our approach has always been and will continue to be the focus on creating lifetime value rather than optimizing for quarter-to-quarter performance," Ek told investors.</p>
<p>Strong user growth, margin pressure</p>
<p>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.</p>
<p>Premium subscribers grew 12% to 276 million while ad-supported users increased 10% to 433 million — both topping forecasts.</p>
<p>Despite the strong user growth, Ek acknowledged challenges in the company's ads business amid rising competition.</p>
<p>"The one area that hasn't yet beaten expectations is our ads business," Ek said on the call. "We've simply been moving too slowly. ... It's really an execution challenge, not a problem with the strategy."</p>
<p>A screen displays the Spotify logo on the floor at the New York Stock Exchange in New York City. (Reuters/Brendan McDermid/File Photo) (Reuters / Reuters)</p>
<p>Some of that softness has trickled through into gross margins, which hit a record 32.2% in Q4 before declining to 31.6% in Q1 and 31.5% in Q2. Spotify now expects margins to slip further to 31.1% in Q3.</p>
<p>Analysts have cautioned that margin expansion may slow this year following a 500-plus basis point gain in 2024. Additionally, the company's recently renewed deals with several of the largest music labels are expected to slightly weigh on future results.</p>
<p>Spotify executives reaffirmed their long-term focus on expanding gross margins through multiple levers, including music, podcast, and audiobook monetization, while emphasizing that it hasn't changed its financial philosophy and continues to guide conservatively based on areas of certainty.</p>
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<p>Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at [email protected].</p>
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