Spotify warned that higher payroll-related taxes tied to rising employee compensation will cut into its operating profit for the third quarter. The company expects earnings to fall short of analyst forecasts, pushing its share price sharply lower.
- Spotify now expects operating profit of €485 million in Q3 from April to June lower than the estimated €562 million by analysts using LSEG data.
- The company predicts revenue of €4.2 billion, missing the €4.48 billion estimate.
- A big jump in payroll and social taxes tied to rising employee salaries and higher share-based pay significantly reduced profit margins totaling €116 million in the second quarter.
- Operating expenses rose about 8% due to increased marketing spending amid fierce competition from Apple and Amazon streaming services.
- Premium subscribers grew by 12%, reaching 276 million, exceeding estimates of 273 million.
- Monthly Active Users (MAUs) rose by 18 million to 696 million, outperforming forecasts.
- Spotify projects its monthly active users to reach 710 million in Q3, matching expectations, while premium subscribers are expected to grow to 281 million, slightly surpassing forecasts.
- Spotify’s board approved a $1 billion increase in its share buyback program, raising total buyback authorization to $2 billion (with $1.9 billion still available through April 2026).
- Following the weaker profit forecast, Spotify’s stock dropped nearly 11% in pre-market trading, wiping out recent gains in value.
- Spotify continues to broaden its content offerings adding more video podcasts and AI-enhanced playlists to attract users and differentiate itself in a competitive landscape.
- Despite short-term pain from higher taxes and costs, Spotify remains optimistic about long-term subscriber growth and profitability.
| Topic | Detail |
|---|---|
| Forecast operating profit | €485 million vs €562 million estimate |
| Revenue outlook | €4.2B vs €4.48B estimate |
| Key headwind | Payroll/social taxes ~€116M |
| Subscriber growth | Premium: 276M (+12%), MAUs: 696M (+18M) |
| Buyback plan | Increase to $2B total authorization |
| Share price movement | Fell ~11% in pre-market |
Spotify’s forecast shows that while user numbers and premium subscriptions are rising fast, the burden of increased payroll-related taxes and operational costs is cutting into profitability. Investor confidence fell quickly, dragging the share price lower. The company’s long-term prospects now hinge on managing costs and growing its content business amid stiff competition.
