The main criticism is that these new investments are distracting Spotify from its subscription-based streaming platform. And other industry observers were left rolling their eyes at news that Spotify is experimenting with non-fungible tokens (NFTs), often referred to as digital art and widely associated with blockchain technology and cryptocurrencies. Some have also questioned Spotify’s move into audiobooks through its acquisition of privately held Findaway. Analysts have taken issue with the amount of money the company has invested in podcasts. New ContentĪs mentioned, Spotify is increasingly branching out into new ventures that aren’t necessarily aligned with its core music streaming business. A continued decline in the growth of ad revenues could be a disaster for Spotify and its stock. The podcasts are expected to attract new advertising dollars. However, analysts expect advertising to comprise more of Spotify’s revenue, especially after the company invested $1 billion into new podcast content since the pandemic began in 2020. The company blamed the slowdown in ad growth on the closure of its operations in Russia due to that country’s invasion of Ukraine. Between January and March, Spotify’s advertising revenue grew a tepid 31% year over year. The lack of progress on margins is seen as a red flag for analysts and investors.Īdditionally, Spotify’s advertising revenue softened during Q1, raising additional concerns. However, executives at Spotify have promised to raise their gross margins to as high as 40%, a level they say will generate consistent net profits and cash flow.
Gross margins in the first quarter came in at 25.2%, down slightly from 25.5% in the previous quarter. The big issue is Spotify’s margins, which appear to have stagnated. While the headline numbers were positive, analysts and investors continued to sell SPOT stock after parsing through the entire earnings report and finding some troubling signs. The Stockholm, Sweden-based company announced that it earned revenue of 2.66 billion EUR ($2.85 billion) and earnings of 0.21 EUR per share (22 cents) a share in Q1. At the end of April, Spotify reported first quarter results that beat Wall Street forecasts.
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