Spotify Shares Drop 13% Despite Profit Growth: Price Hikes Raise Concerns

Spotify Technology SA saw its shares decline by 13% despite reporting better-than-expected earnings in its latest quarterly report. The company improved profitability through an increase in subscriber numbers and a rise in advertising revenue, but investors are concerned that the implemented price hikes could lead to subscriber losses in the long term. Spotify's third-quarter revenue rose 11% year-over-year to €3.4 billion, surpassing analyst estimates. The company increased its monthly active users to 574 million, while paid subscribers rose to 226 million. However, despite earnings per share of €1.59 exceeding expectations, the market focused on the impact of price increases. Management acknowledged that the price hikes, particularly in developed markets, could slow subscriber growth. The company expects operating profit between €600 million and €700 million in the fourth quarter, but this forecast is not as strong as some investors had hoped. In the increasingly competitive music streaming market, rivals such as Apple Music and Amazon Music not implementing similar price increases could put Spotify at a disadvantage. Spotify's investments in podcasts and audiobooks have yet to deliver the expected returns. Although the company is trying to control costs in these areas, investors believe the short-term profitability growth is not sustainable. The decline in the stock indicates waning market confidence in the growth story. This is not investment advice.