Spotify (NYSE:SPOT) shares soared in premarket trading Tuesday after the company reported better-than-expected earnings and gross margin for the fiscal Q2 2024.
The company’s earnings per share (EPS) came in at €1.33, topping the consensus estimates of €1.05. Revenue for the quarter totaled €3.81 billion, slightly below the consensus estimate of €3.82 billion.
Premium revenue reached €3.35 billion, just above the estimate of €3.34 billion.
SPOT stock jumped more than 13%.
Spotify’s Q2 gross margin stood at 29.2%, exceeding the consensus projection of 28.1%. Moreover, the audio streaming giant's operating income was €266 million, surpassing the analysts' forecast of €241 million.
"Given the gross margin beat and better-than-anticipated 3Q24 operating income and gross margin outlook, we would expect to see shares trade higher today," analysts at Citi commented.
Monthly active users (MAUs) were reported at 626 million, below the estimated 631.46 million. Ad-supported MAUs were 393 million, also falling short of analysts’ expectations of 397.71 million.
Spotify projects Q3 2024 revenue of €4 billion, notably below the consensus forecast of €4.365 billion.
However, the company's guidance for gross margin at 30.2% and operating income at €405 million significantly surpassed the consensus estimates of 28.5% and €302 million, respectively.
Meanwhile, analysts at JPMorgan said:
"SPOT continues to execute well & drive meaningful profit improvements across Music, Podcasts, & Other Cost of Revenue."
Analysts said their focus on the earnings call will be on 2024 drivers of gross margin, operating income, and free cash flow; second-half MAU; early effects of the US price increase and international price increase plans; plan tiering impacts; and podcast growth.