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Spotify (NYSE:SPOT) shares came under pressure after the streaming giant reported first-quarter results that delivered strong user growth but fell short on forward guidance. Its share price dropped 4.1% at 12.33pm today. Monthly active users climbed 10% year-over-year to 678 million, while premium subscribers jumped 12% to 268 million, marking the best first-quarter subscriber gains since 2020. However, Spotifys forecast of 689 million monthly users for the second quarter missed Wall Streets 694 million estimate, weighing on investor sentiment. CEO Daniel Ek maintained a confident tone, emphasizing that engagement remains high, retention is strong, and the freemium model offers critical flexibility in an uncertain macro backdrop.
Operationally, Spotify continues to execute on its long-term strategy. Revenue rose 15% year-over-year to 4.19 billion, helped by global price increases and growing ad-supported revenues across music and podcasts. Gross margin came in at 31.6%, slightly ahead of expectations but a step down from last quarters record 32.2%. Management remains focused on driving profitable growth through bundled offerings, strategic pricing moves, and tighter control over podcast investments. Still, renewed licensing deals with major labels and higher payroll taxes tied to the stocks strong rally may introduce modest headwinds to margin expansion in the coming quarters.
Looking ahead, Spotify sees significant room to unlock further growth through advertising, a potential superfans tier, and gradual pricing optimization. Management reiterated confidence in the platforms ability to deepen its competitive moat despite near-term volatility. After a 110% surge over the past year, Spotifys long-term trajectory appears firmly intactpositioned to scale its audio ecosystem while maintaining a disciplined approach to profitability.
This article first appeared on GuruFocus.