Spotify shares rise despite EPS miss as subscribers and margins beat

what happened

Spotify Technology reported third-quarter revenue of 4.97 billion, a 16% increase on the year, according to GuruFocus. The figure landed slightly under the 4.98 billion analysts had expected. Diluted earnings per share came in at 2.48, short of the 2.84 forecast, yet the stock climbed 7.66% before the open.

Premium subscribers grew 9% to 306 million, one million above the company's guidance, while monthly active users rose 11% to 788 million. Profitability also improved: the margin reached 33.0% compared with 31.6% a year earlier, and operating profit climbed 15% to 672 million, also beating the outlook. Advertising revenue advanced 9% at constant currency.

Co-CEO Alex Norstrom told analysts on the earnings call: "Very few consumer subscription businesses have ever reached this scale." For the fourth quarter, the company guides to revenue of 5.2 billion, operating income of 820 million and a 33.8% margin. It targets 316 million subscribers and 818 million monthly users. Spotify has bought back 1.1 billion in shares so far this year, through October 21.

why it matters

The share reaction suggests investors are focused on subscriber growth, margin expansion and the outlook rather than the EPS shortfall. For the streaming and media sector, the report is a read on pricing power and advertising monetization.

market impact

Spotify (SPOT): EPS miss offset by subscriber and margin gains, supporting sentiment in the stock

tags

instruments