Music streaming giant Spotify added another 6 million paying customers in the first quarter but lowered its revenue forecast as ad sales got hit by the economic fallout of the pandemic.
The global health crisis began to slam Spotify’s business in late February, the Stockholm-based company said Wednesday, with steeper declines in hard-hit markets such as Italy and Spain.
Declines in consumption didn’t hurt subscriber growth, however, as the company logged 6 million paid consumers for a total of 130 million paying subscribers for the quarter ended March 31. Analysts were expecting 128.6 million paid subscribers.
Spotify said consumption of its music and podcasts is on the rebound and in many markets has already “meaningfully recovered.”
Shares of Spotify climbed nearly 11 percent in pre-market trading.
Spotify’s total subscriber base, which includes paid subscribers and subscribers that opt for Spotify’s free service with ads, reached 286 million, at the high end of the company’s expectations.
Spotify said it started seeing a slowdown in ad sales in the second half of March. However, the company said it is not as ad-dependent as other media companies, noting that ads account for only around 10 percent of its total revenue.
“Despite the global uncertainty around COVID-19 in Q1, our business met or exceeded our forecast for all major metrics,” the company said in it letter to shareholders. “For Q2 and the remainder of the year, our outlook for most of our key performance indicators has remained unchanged with the exception of revenue where a slowdown in advertising and significant changes in currency rates are having an impact.”
During the quarter, Spotify posted a profit of $1.1 million but an operating loss of $18.5 million. Revenue grew 22 percent to $2 billion, besting analysts’ sales projections of $1.86 billion.
For the second quarter, Spotify expects paid subscribers in the range of 133 million to 138 million. Analysts were expecting 136.5 million.
It also anticipates total revenue in the range of $1.90 billion to $2.21 billion. Analysts are looking for $2.19 billion.
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