Music streaming leader Spotify reports modest rise in paid users

The Spotify logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 3, 2018. REUTERS/Brendan McDermid

LONDON/STOCKHOLM (Reuters) – Spotify (SPOT.N), the world’s most popular paid music streaming service, on Thursday reported a modest 5 percent rise in premium subscribers for its third quarter, while revenue and gross margins were roughly in line with market expectations.

Caught short by a global sell-off in major tech stocks over the past month, shares of Spotify have erased their roughly 30 percent gain after the Swedish company’s closely watched U.S. stock market debut in April on the New York Stock Exchange.

Monthly subscribers, which deliver 90 percent of revenue, rose to 87 million, up from 83 million in the quarter ending June, it said. The latest results matched the average forecast in a Thomson Reuters analyst poll.

Total users rose to 191 million, including free, advertising-supported listeners.

The company tightened its expectations for full-year 2018 monthly active listeners to between 199 million to 206 million users. Analysts, on average, had been predicting 208 million users by the end of the year.

Third-quarter revenue rose 31 percent to 1.352 billion euros ($1.54 billion). Seventeen analysts polled by Thomson Reuters had forecast, on average, 1.33 billion euros.

Gross margins rose to 25.3 percent from 22.3 percent in the third quarter of 2017. Analysts were looking for margins around 24.9 percent, according to the Thomson Reuters poll.

Spotify, which launched its streaming music service a decade ago, has enjoyed a surge in subscriber growth in recent years. The growing shift by listeners to paid subscription services from free or pirated music listening are a key factor driving the improved financial health of the wider music industry.

($1 = 0.8789 euros)

Reporting by Eric Auchard in London, Helena Soderpalm and Olof Swahnberg in Stockholm; Editing by Edmund Blair

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