Spotify (SPOT) Tanks 8% as Earnings Struggle Under Russia Fears

Trade SPOT Stock Your Capital Is At Risk
Ollie Martin
Updated: 27 Apr 2022

Key points:

  • SPOT shares rose 3.5% before reversing to a loss of 8% with the market open
  • The platform posted EPS of $0.21 per share on revenue of $2.82B, beating expectations
  • Loss of subscribers in Russia weighs on buyer sentiment

Spotify (NYSE: SPOT) posted mixed Q1 earnings this morning in a difficult time for tech companies. Geopolitical pressures and inflationary worries are constricting buyer sentiment, and toppy valuations are coming under scrutiny. The music platform initially rose in premarket this morning, before a steep reversal of around 8%. The selling can only really be attested to fears of subscriber numbers in Russia, as well as wider negative tech sentiment. 

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The Swedish music platform posted EPS of $0.21 per share on revenue of $2.82B, beating top and bottom estimates of a $0.26 loss and revenue of $2.91B. The platform confidently announced rising subscribers despite the inevitable hit from discontinuing operations in Russia; expecting a hit of up to 2M subscribers. 

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The company’s gross margin came in at 25.2%, which is a closely watched metric for Spotify investors. Looking to the year ahead, the streaming company expects monthly active users to hit 428M in Q2, including 187M premium subscribers; forecasting revenue of $2.8B and an operating loss of $197M, with gross margins expected to stay stable at 25.2%. 

Investors first thought that the controversy involving Joe Rogan might have some impact, but apart from an initial market reaction there hasn’t been any further noticeable discourse. Podcasts are becoming a leading feature on the platform, up to 4M from 3.6M available podcasts the previous quarter, with consumption hitting an all-time high. 

Positive earnings wasn’t enough for Spotify shares this morning. Despite positive subscriber growth and stable gross margins, the initial 3.5% gain this morning has given way to a sharp 9% reversal as the market opened. Tech sentiment remains heavily bearish, and the situation in Russia also weighs on optimum subscriber growth. 

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