$SPOT (+0,05%) on Tuesday forecast an operating profit for the current quarter that would fall short of Wall Street estimates. The company is grappling with higher payroll taxes that have dimmed the luster of its strong subscriber growth, sending the company's stock price down 8% in premarket trading.
The company's efforts to boost its profitability are being closely watched by investors after benefiting from price increases and cost-cutting measures in recent years.
Spotify's operating profit of 509 million euros in the March quarter also fell short of estimates. This was due to higher payroll taxes in some countries, which are linked to employees' salaries and social benefits.
According to the data compiled by LSEG, the company forecast 689 million active users per month for the current quarter. The average analyst estimate, on the other hand, was 684.9 million.
Spotify expects the number of premium subscribers to rise to 273 million in the second quarter, above Visible Alpha's estimate of 271.5 million.
According to data compiled by LSEG, the company forecast an operating profit of €539 million ($614.24 million) for the second quarter, below estimates of €557.5 million.
"The underlying data is currently very positive. Engagement remains high, retention is strong and thanks to our freemium model, people have the flexibility to stay with us even when the situation seems more uncertain," said CEO Daniel Ek.
"There may be some noise in the short term, but we remain confident about the long-term development."
The number of premium subscribers increased by 12% to 268 million in the first quarter, exceeding Visible Alpha's estimates of 265.3 million. The company had 678 million monthly active users, above estimates of 671.9 million.
Turnover rose by 15% to 4.19 billion euros, slightly below the estimate of 4.20 billion euros.
Spotify forecast revenue of 4.3 billion euros for the second quarter, in line with estimates.
(1 $ = 0.8775 euro)