Written by Brenda Nakalema

Spotify’s Subscribers Climb but Outlook Drags Stock Down

Spotify shares took a dive on Wednesday despite the fact that the streaming platform reported an drastic increase in users …

Spotify logo displayed on a phone screen and headphones are seen in this illustration photo taken in Poland on October 18, 2020. (Photo Illustration by Jakub Porzycki/NurPhoto via Getty Images)

Spotify shares took a dive on Wednesday despite the fact that the streaming platform reported an drastic increase in users during the first quarter. According to some analysts, it seems like the company’s weak guidance dragged down the stock.

Shares of Spotify (ticker: SPOT) dropped by 6%, landing at $103.76 a share. The company said monthly active users climbed 19% in the quarter from a year earlier to roughly 422 million. This number apparently included the 3 million users that opted out of the service during the service outage and then created new accounts to log back in.

According to the company, even without those users, it still believes that MAUs would have reached 419 million in the first quarter, going further than expectations by roughly 1 million.

Spotify reported its premium subscribers grew by 15% in the first quarter to 182 million. Aside from the involuntary churn of roughly 1.5 million subscribers as a result of the company’s exit of the Russian market, “growth was above expectations and aided by outperformance in Latin America and Europe,” said the company.

The company added that average revenue per user in its premium business climbed 6% to €4.38. Total revenue in the quarter climbed 24%, reaching €2.66 billion. The company reported a profit of €131 million, an increase from the figure last year of €23 million.

According to FactSet, Spotify said it expects its second-quarter to register monthly active users of 428 million, a dip below analyst expectations of 428.1 million. Total premium subscribers had been forecast at 187 million, and yet analyst expectations sat closer to 189 million.

The company says that the forecast assumes it will lose an additional 600,000 subscribers from its Russian exit in April. The company also announced it expects total revenue in the second quarter of €2.8 billion, assuming a 6% foreign exchange tailwind to year-over-year growth and a gross margin of 25.2%.