The company blamed the slowdown in ad growth on the closure of its operations in Russia due to that country’s invasion of Ukraine. Between January and March, Spotify’s advertising revenue grew a tepid 31% year over year. The lack of progress on margins is seen as a red flag for analysts and investors.Īdditionally, Spotify’s advertising revenue softened during Q1, raising additional concerns. However, executives at Spotify have promised to raise their gross margins to as high as 40%, a level they say will generate consistent net profits and cash flow. Gross margins in the first quarter came in at 25.2%, down slightly from 25.5% in the previous quarter. The big issue is Spotify’s margins, which appear to have stagnated.
While the headline numbers were positive, analysts and investors continued to sell SPOT stock after parsing through the entire earnings report and finding some troubling signs. The Stockholm, Sweden-based company announced that it earned revenue of 2.66 billion EUR ($2.85 billion) and earnings of 0.21 EUR per share (22 cents) a share in Q1. The company was founded by Daniel Ek and Martin Lorentzon in April, 2006 and is headquartered in Luxembourg.At the end of April, Spotify reported first quarter results that beat Wall Street forecasts. It also serves both premium subscriber acquisition channel and a robust option for users who are unable or unwilling to pay a monthly subscription fee but still want to enjoy access to a wide variety of high-quality audio content. The Ad-Supported segment provides users with limited on-demand online access of music and unlimited online access of podcasts on their computers, tablets, and compatible mobile devices. It also offers a music listening experience without commercial breaks. The Premium segment provides subscribers with unlimited online and offline high-quality streaming access of music and podcasts on computers, tablets, and mobile devices, users can connect through speakers, receivers, televisions, cars, game consoles, and smart watches. The company operates through the following segments: Premium and Ad-Supported. Spotify Technology SA is a digital music service offering music fans instant access to a world of music.
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