Spotify posts surprise loss despite solid user growth
By Josh White
Date: Tuesday 29 Jul 2025
(Sharecast News) - Spotify reported robust user growth in the second quarter of 2025, surpassing internal forecasts and analyst expectations, although the streaming giant posted an unexpected net loss as currency headwinds and rising costs weighed on results.
Monthly active users rose 11% year-on-year to 696 million, seven million above the company's own guidance.
Premium subscribers grew 12% to 276 million, also ahead of forecasts.
The strong performance was driven by growth across all major regions, with Spotify citing particularly strong momentum in Latin America, Europe, and developing markets.
Total revenue increased 10% year-on-year to €4.19bn, led by a 12% rise in premium revenue.
On a constant currency basis, overall revenue was up 15%.
However, that came in slightly below the €4.3bn forecast, with the company attributing the miss to a €104m negative impact from foreign exchange movements.
Despite the top-line growth, Spotify swung to a net loss of €86m, compared to a €274m profit in the same period last year.
Operating expenses rose 8% to €914m, largely due to higher marketing and personnel costs, and a sharp increase in "social charges" - payroll taxes tied to share-based compensation - following a surge in the company's stock price.
The charges exceeded expectations by €98m, significantly denting operating income, which nonetheless grew 53% year-on-year to €406m but fell short of the €539m forecast.
Gross margin improved by 227 basis points to 31.5%, in line with expectations, reflecting gains across both the premium and ad-supported segments.
Premium gross margin rose to 33.1%, helped by revenue growth outpacing content costs, while the ad-supported segment saw margin expand to 18.3%, despite a 1% decline in advertising revenue.
Spotify recorded a record €700m in free cash flow for the quarter, up 43% year-on-year, and doubled its share repurchase programme to €2bn.
It also expanded its audiobooks in premium offering to four new European markets and launched an add-on subscription, Audiobooks+, in 13 countries.
Additional product updates included voice-enabled AI DJ requests in over 60 markets and expanded advertising inventory access through its partnership with Magnite.
"People come to Spotify and they stay on Spotify," said chief executive Daniel Ek.
"By constantly evolving, we create more and more value for the almost 700 million people using our platform.
"It's also boosted the industries of music, podcasts, and audiobooks."
For the third quarter, Spotify said it expected to reach 710 million monthly active users and 281 million premium subscribers, with revenue projected at €4.2bn.
However, the company warned that currency fluctuations and regulatory costs may continue to affect profitability, guiding for a gross margin of 31.1% and operating income of €485m, including an estimated €25m in social charges.
At 0835 EDT (1335 BST), shares in Spotify Technology were down 7.34% in premarket trading in New York, at $650.
Reporting by Josh White for Sharecast.com.
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