Spotify Technology SA (NYSE:SPOT) shares struggled after the company reported slowing ad revenues and lower margins in its third-quarter results, even as the streaming giant met or beat expectations in other areas.
Spotify posted revenue of $3 billion for the quarter, up 21% year-over-year and in line with analyst expectations of $3.02 billion. Its earnings came in at a loss of $0.86 per share, down from a $0.01 gain a year earlier and worse than expectations of $0.82.
Total monthly active users increased 20% year-over-year from 381 million to 456 million, which beat expectations of 448.6 million.
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However, the company’s gross margin was 24.7%, which missed its own guidance. The company also encountered “slower than forecast advertising growth given the challenging macro environment.”
"This is an early indicator of the concerns businesses are having about the economy," Spotify CEO Daniel Ek said in an interview with Reuters.
"We’re not concerned long term, but it’s definitely impacting us in short term, and it contributed to the gross margin hit that we had this quarter, too."
Looking ahead, the company forecasted fourth-quarter revenue of $3.18 billion, along with 479 million monthly active users and an additional 7 million premium subscribers, which would bring the total to 202 million.
Spotify shares were down nearly 7% to $90.49 in aftermarket trading Tuesday.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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