Spotify on Wednesday reported second-quarter revenue above analysts’ estimates, showing a 14% increase in paying subscribers, and an upbeat current quarter forecast, though it stopped production of its dashboard accessory, the Car Thing. will do it. The company’s shares rose 5 per cent in premarket trading. Its monthly active users increased from 428 million to nearly 433 million expected, and reached 450 million in the third quarter.
The Swedish music streaming company’s revenue comes from paying customers and running ads to users who use its service for free. Ad supported revenue grew 31% in the quarter. Investors are worried about companies relying on such revenue after Snapchat owner Snap warned last week that advertisers were tightening spending in response to the dark economic outlook.
“We’ve seen a slight slowdown in the last two weeks of the quarter,” Spotify Chief Financial Officer Paul Vogel said in an interview. “While we expect advertising to become a large part of our business over the long term … it’s still only a small part of our revenue at 13%,” he said.
Spotify’s Car Thing is a dashboard-mounted voice-controlled streaming device that was launched in April last year ahead of a wider rollout.
Premium customers, which account for the majority of the company’s revenue, increased to 188 million, which topped analysts’ expectations of 187 million. According to Refinitiv’s IBES data, Spotify reported a 23% increase in revenue to 2.9 billion euros ($2.94 billion) compared to expectations of 2.8 billion euros.
Car Thing, a dashboard-mounted voice-controlled streaming device, was launched in April last year ahead of a wider rollout. Priced at $89.99, the device is currently discounted to $49.99. At this price point and with increasing supply chain issues, the company could not achieve an attractive economic profile, Chief Executive Daniel Eck said in an interview.
“We saw a lot of demand in the car with the current integration and carmakers are waking up and offering better and better in-car solutions,” he said.
Spotify, which has been hiring aggressively, slowed headcount growth to 25% at the start of the third quarter, while taking a closer look at marketing activity. One said that with the uncertainty in the market, it is prudent to do so as hiring is a long-term decision that cannot be easily reversed.
In line with expectations, forecast current-quarter paid customers of 194 million. It expects revenue of €3 billion, up from estimates of €2.95 billion.