By Senad Karaahmetovic
Shares of Spotify (NYSE:SPOT) are trading approximately 10% higher in pre-open Tuesday after the audio streaming giant offered an upbeat forecast for this quarter.
For its fourth quarter, Spotify reported a loss per share of €1.40 on revenue of €3.16 billion, worse than the analyst expectations for a loss of €1.28 on revenue of €3.18B.
Still, the gross margin came in 80 basis points ahead of the consensus. The company said the expansion took place primarily to lower investment spending and broad-based music favorability.
Moreover, Spotify reported an increase of 20% in monthly active users (MAUs) to 489 million, easily ahead of the 478.5M consensus. The average revenue per user came in at €4.55, below the €4.60 estimate.
While Q4 results were mixed at best, Spotify did offer more upbeat guidance for the ongoing quarter. Specifically, the company expects to hit 500M MAUs, including 207M premium subscribers, up from 205M in Q4 2022.
The operating loss is seen at €194M on revenue of €3.1B, which compares to the analyst expectations for a loss of €123.1M on sales of €3.06B.
Wells Fargo analysts commented:
"4Q22 margins topped guidance and Street on strong subs, providing the greenshoots bulls want. 1Q23 margin/OI guidance is light due to severance. We see '23 as pivotal for margin progress so that journey — as well as pricing — is key for the call."
Bank of America analysts added:
"We remain bullish on the long-term potential of SPOT, which should benefit from an improvement in advertising and deeper penetration in existing markets. Shares underperformed significantly in CY22 largely due to disappointing gross margins and broader concerns surrounding SPOT’s path to long term profitability. We believe several quarters of execution and margin expansion will go a long way in assuaging investor concerns surrounding the long-term growth and margin potential in the business."