Spotify shares drop after surprise Q2 loss and weak outlook
Spotify’s stock just plunged over 12% after a surprise loss and weak outlook, despite record user growth.
Spotify’s stock price plunged by over 12% this week following a disappointing second-quarter earnings report. Despite strong user growth, the company’s financials failed to meet investor expectations, raising concerns about its profitability and cost structure.
Spotify reported a net loss of €86 million (or €0.42 per share) for Q2 2025, a contrast to the €274 million profit posted during the same period last year. Analysts had anticipated a strong showing, with consensus forecasts projecting positive earnings in the range of €1.80 to €1.98 per share. The loss came as a major surprise and immediately triggered a sharp selloff.
Revenue climbed 10% year-over-year to €4.19 billion, but this too missed expectations (estimated near €4.26 billion), largely due to currency headwinds from a weakening U.S. dollar. Even more troubling was the company’s rising internal costs, €116 million in additional payroll taxes and social charges, attributed to stock-based employee compensation. These charges put further pressure on Spotify’s operating income, which came in at €406 million, below analysts’ expectations of around €480 million.
In terms of user metrics, Spotify continued to post growth:
- 696 million monthly active users (MAUs), beating forecasts of 689 million
- 276 million premium subscribers, up 12% year-over-year
The company anticipates those numbers will grow to 710 million MAUs and 281 million premium users in Q3.
However, despite this growth, the underlying financials told a different story. Investors increasingly worry that Spotify is adding users faster than it is monetizing them, particularly in its advertising division.
Spotify’s ad-supported revenue declined by 1%, a notable miss in a sector the company has aggressively invested in. Despite new automated ad-buying tools and growth in podcast consumption, advertising remains a weak spot. CEO Daniel Ek admitted on the company’s earnings call that they were “moving too slowly” in fully executing their ad strategy.
Adding to concerns was Spotify’s Q3 outlook: the company projects operating profit at €485 million, well below the €562 million consensus. Investors viewed this cautious guidance as a signal that cost pressures and slower-than-expected monetization will continue to weigh on performance in the coming months.
Despite this, Spotify has not abandoned its long-term ambitions. The company recently authorized a €1 billion share buyback, adding to a previously announced repurchase program, an attempt to reassure markets of management’s confidence.
Looking forward, Spotify is experimenting with new monetization avenues:
- A “superfan” tier offering exclusive content and perks
- Expanded podcast and audiobook offerings
- Gains from regulatory shifts in app store policies, which may allow Spotify to bypass Apple’s in-app purchase fees
Still, with Spotify shares trading at about 50 times forward earnings, the pressure is on to deliver tangible profit growth, not just user expansion.
Spotify’s recent earnings report reflects the growing tension between user growth and profitability. While the company continues to dominate global streaming, its internal costs, underwhelming ad revenues, and weaker-than-expected profit guidance have concerned investors. The stock’s sharp decline is a clear reminder that market sentiment hinges not only on scale, but on how effectively that scale is monetized.