Spotify hits 75 million paid subscribers; Wall Street unimpressed

Daniel Ek Founder and CEO Spotify speaks onstage at Spotify Press Announcement

You have missed it if you blinked, but Spotify went public just a few weeks ago and, in turn, the streaming service on Wednesday released its earnings report for the March quarter.

Spotify had projected it would end its first quarter with 73 million to 76 million subscribers in a disclosure made a week before its stock debuted on the New York Stock Exchange in early April.

Spotify lost 169 million euros, or 1.01 euros per share, in the first quarter, narrowing from a loss of 173 million euros at the same time previous year.

EPS (GAAP): A loss of €1.01 ($1.21) a share.

Looking ahead, Spotify predicted that it would add 4 million to 8 million more paid subscribers by the middle of the year and that its monthly active users would increase 5 million to 10 million. This included 75 million paying subscribers, up 45 percent year-on-year, from which the company generates the vast majority of its revenue. This is up from 71 million subscribers the company announced back in February. At current exchange rates, that's worth $911m. The streaming music leader fell short of investor hopes that it could turn free music listeners into paying subscribers at a faster clip, and its shares dropped as much as 9 percent. As well, operating loss was €41 million or approximately 4 percent of total revenue, out performing its guidance for the quarter thanks to the gross profit outperformance.

Revenue from free, advertising-supported services which Spotify uses to woo new listeners to the service in order to eventually convert them to paying members, grew to 102 million euros in the first quarter, up 38 percent, year-over year.

Gross margin topped the high end of guidance at 24.9%.

Spotify said it expects monthly active users to climb to between 175 million and 180 million and to garner 79 million to 83 million paid subscribers.

It said it was also seeing "increasing momentum" in Japan - the world's second largest music market where CDs still dominate.

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