Spotify Shares Drop Even After Matching Subscriber Growth Expectations

The Spotify banner hangs from the New York Stock Exchange - Getty-H 2018
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The music streaming service currently has 170 million active users.

Spotify Technology said in its first earnings report since it became a publicly traded company on the New York Stock Exchange that it ended its first fiscal quarter with 75 million premium subscribers and 170 million monthly active users of its digital music service. 

While the subscriber results were largely in line with the expectations of analysts, shares of Spotify were sinking 10 percent in after-hours trading after rising 3 percent to $170 during Wednesday's regular session. 

At the closing bell and before the slide in share price, Sweden-based Spotify sported a $30.3 billion market cap, which dwarfs that of U.S.-based Pandora, with a market cap of $1.4 billion. 

Spotify said its monthly active users grew 30 percent year over year, while premium subs were up 45 percent and ad-supported monthly active users were up 21 percent.

Spotify's largest market is in Europe, where 36 percent of its monthly active users reside, the company said Wednesday. After that is North America, which accounts for 32 percent, then Latin America (21 percent) and the rest of the world (11 percent.).

As for premium subscribers, 40 percent hail from Europe, 31 percent from North America, 20 percent are from Latin America and 9 percent are from the rest of the world.

The company said that by the end of the quarter it will have from 175 million to 180 million monthly active users worldwide and from 79 million to 83 million premium subscribers, though some on Wall Street were hoping for stronger guidance.

Spotify reported an operating loss on $1.36 billion in revenue, which is up 26 percent from a year earlier and was about what analysts had projected for the company, which went public about a month ago.

Spotify boasts several partnerships, including one with Hulu where existing subscribers can get both services for $12.99 per month. The company said Wednesday that new subscribers can get that plan, too, though not until the deal rolls out sometime this summer.

In a letter to shareholders on Wednesday, Spotify noted that the International Federation of the Phonographic Industry says the global recorded music market was worth $17.3 billion in 2017, up 8 percent over 2016, and that streaming now accounts for 38 percent of the total — the single best revenue source.