Q1 Earnings Review for Spotify: A Possible Slowdown Ahead

Q1 Earnings Review for Spotify: A Possible Slowdown Ahead ...

On April 27, Spotify (SPOT) - Get Spotify Technology SA Report released its results for the first quarter (Q1) of 2022, causing the market to be dissatisfied. In the day''s aftermarket trading, the stock was down nearly 13%.

In some instances, the company, which achieved positive results, was unsatisfactory, but it declined to meet analysts'' projections and management''s own guidance. So let''s look at the key points highlighted by the company in its earnings release.

Review of Q1 earnings: A Possible Slowdown Ahead

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Check out the MavenFlix:Netflix Stock Q1 Earnings Review: Blood In The Streets.

Users and revenue are still rising, although they are less likely to be expected.

Spotify is still increasing the number of users on its platform, unlike other streaming services. In this first quarter, the company added 182 MAUs (monthly active users), a decrease of 19% year over year (YoY).

However, the company''s guidance had requested an additional 183 million new users. However, the fact that the company failed to meet its targets may indicate a potential decrease in subscribers, as has been happening with other organizations like Netflix (NFLX) - Get Netflix, Inc. Reportand Disney (DIS) - Get Walt Disney Company Report.

Spotify''s revenues increased by 2 billion euros this quarter, with a total of revenue of 2 billion euros. The average revenue per user (ARPU) also increased by 6% during the period.

Expectations for Q2

SPOT has projected a total of 14 million MAUs for the next quarter. This may be considered conservative given that in the second quarters of 2020 and 2021, the company had already added 13 million and 9 million MAUs.

Besides, the company stressed that it expects margins to hold for the next quarter, something the market anticipates to improve. As with Q1, Spotify is projected its Q2 gross margin at 25.2%.

Daniel Ek claims that his company is different from Netflix.

Daniel Ek, Spotify''s CEO, said during a conversation that for him it is not appropriate to organize his company and Netflix in the same "box." Even if Spotify is both media companies and based on a subscription model, the difference is still.

According to the CEO, these differences are the fact that Spotify has its free plan, which includes hundreds of millions of articles of content and is thriving in the audio streaming industry.

Our Take

The IT sector will be severely penalized in 2022. We can assume that the market did not like Spotify''s results either, considering the stock''s drop about 13% on the day of the earnings release.

We should enjoy the growth of these stocks and the coming months with caution, by studying the companies and their business models better to see if they are effective to deliver profits compatible with their trading values.

This is not investment advice. The author may be long one or more stocks mentioned in this report, and the article may also include affiliate links. These partnerships do not influence editorial content. Thanks for assisting MavenFlix)

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