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Spotify Technology S.A. reported its first quarterly earnings as a public company late Wednesday, which investors loudly booed, giving the stock a nearly 8% haircut in after-hours trading once the results were announced.
The Stockholm-based streaming-music service boasted 170 million monthly active users, from which the company extracted sales of €1.14 billion, compared with Wall Street’s expectation of €1.16 billion, according to FactSet. Monthly average users grew 30% year-over-year, but as Spotify added listeners it continued to bleed red, posting net losses of €169 million, which narrowed from net losses of €173 million during the same period last year.
Despite its subscriber and listener growth, Spotify has waded into a competitive field, pitting its services against the likes of Amazon.com Inc. Alphabet Inc.’s Google and its offerings, as well as Apple Inc. — all of which have additional business units that are substantially profitable.
Apple in particular has been aggressive about promoting its services, and in its results reported Tuesday, said that services revenue — which includes music — had grown significantly more than expected.
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On Wednesday’s call with analysts, Spotify Chief Executive Daniel Ek said the company has yet to see an impact in the two factors he looks at to judge competition: user churn, or the number of listeners quitting the service, and the company’s behavior versus its forecasts.
“We don’t see any kind of meaningful impact of competition,” Ek said. “In fact, when we look at this, we don’t really think that this is a winner-takes-all market. In fact, we think multiple services will exist in the markets and we’re all kind of in a growing market, and we’re just focused on growing that market and capturing more market.”
Ek also dismissed concerns that smart-speaker offerings from the likes of Amazon and Google may be a challenge, saying that they are actually a potential advantage, citing Spotify’s widespread availability across hardware platforms as a strength.
“Spotify is an application that’s both available on Alexa speakers and Google Home and we’re doing fairly well there,” said Ek. “So we actually do see our share of voice growing, and we view that long term as an opportunity not a threat.”
The vast majority of the company’s revenue — €1.04 billion — comes from paid subscribers, with €102 million from ad-supported subscriptions. Spotify has about 99 million ad-supported monthly users and 75 million paid subscribers.
Spotify went public via a direct listing in April, somewhat of an unusual move that didn’t afford it the ability to raise capital, as most companies aim to do with an initial public offering. Since the company began trading, the stock has gained about 14% — prior to Wednesday’s after-hours losses — as the benchmark S&P 500 index rose 1.5%. The stock closed up 3.1% during Wednesday’s regular session to $170.