Spotify's Q1 Earnings Miss But Stock Rallies on Subscriber Growth

Spotify's stock price has risen 3% despite missing Q1 earnings expectations. The company reported a 7% YoY EPS increase and 11% sales growth. Investors are optimistic due to strong subscription growth and positive forecasts for revenue and earnings.

Date: 03-05-2025

AI Rating: 6

**Earnings Per Share (EPS)**: Spotify reported Q1 EPS of $1.13, significantly lower than the expected $2.29. However, it was a 7% increase compared to $1.05 in Q1 2024. This indicates a mixed but slightly positive outlook on year-over-year profitability, albeit below market expectations. Given that analysts still project annual EPS to soar by 78% this year, the sentiment remains cautiously optimistic. The missed estimates could raise concerns among investors, leading to a rating of 5 for EPS.

**Revenue Growth**: Revenue for Q1 grew by 11% YoY to $4.4 billion, falling short of expectations of $4.59 billion. This discrepancy could impact future investor confidence. Nevertheless, with the projected revenue increase to $4.52 billion in Q2 and 16% growth anticipated in fiscal 2025, there is still application for growth in a longer-term perspective. Revenue growth earns a rating of 6.

**Net Income and Profit Margins**: While net income figures weren’t detailed, the anticipated gross margin of 31.5% and operational income of €539 million in Q2 signal encouraging profitability prospects. This could reflect positively on overall profit margins despite current variations, resulting in a rating of 7.

**Free Cash Flow (FCF)** and **Return on Equity (ROE)**: The report does not provide specific FCF or ROE figures. Thus, they will not be included in the analysis.

Overall, Spotify’s future outlook appears strong due to expected subscriber growth, despite recent Q1 misses. The ongoing trend of positive earnings estimate revisions coupled with strong potential growth in the coming years can be seen as a fundamentally robust investment opportunity.

Stocks: SPOT