Spotify (NYSE:SPOT) shares fell more than 10% in early U.S. trading on Tuesday after the company issued weaker-than-expected guidance for the current quarter, citing currency headwinds and rising payroll costs.
While analysts have increasingly focused on Spotify’s profitability after years of user growth prioritization, the company continues to face mounting expenses—particularly related to personnel. In the second quarter, share-based compensation charges totaled €115 million, which was €98 million higher than originally anticipated.
The spike in compensation-related taxes followed a significant increase in Spotify’s stock price, which has surged more than 53% year-to-date.
Despite efforts to rein in costs, operating expenses climbed 8% year-over-year in Q2. These rising costs partly offset strong gains in Spotify’s premium product revenues, which helped push total revenue up 10% from the same quarter last year to €4.19 billion. However, that figure missed Bloomberg’s consensus estimate of €4.27 billion.
Operating income came in at €406 million, also falling short of analysts’ expectations of €490.3 million.
Looking ahead to the third quarter, Spotify projects operating income of €485 million on revenue of €4.2 billion—both below Wall Street forecasts.
Still, the company offered some positives. Spotify expects monthly active users to reach 710 million in Q3, beating expectations. It also reaffirmed confidence in its strategy, saying it remains on track to “deliver growth” and stronger margins heading into 2025.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.