• Spotify’s first-quarter revenue and user growth narrowly outperformed expectations.
  The company’s softer-than-expected premium subscriber target for the second quarter triggered a sharp post-market selloff.

• New co-CEO leadership is now navigating Spotify through a period of heightened guidance uncertainty and investor scrutiny.

Spotify experienced a dramatic stock decline of more than 13% in early trading on Tuesday, as investor enthusiasm over a first-quarter earnings beat was quickly overshadowed by tepid subscriber projections. The audio streaming giant found itself walking a tightrope between solid operational results and forward-looking caution, a balance that ultimately spooked the market. While the company demonstrated resilience in user acquisition and revenue generation, the reaction underscored how sensitive investors remain to any signs of slowing growth in its premium membership base, the core engine of its recurring revenue model.

For the first three months of the year, Spotify reported an 8% year-over-year increase in revenue, reaching 4.5 billion euros, equivalent to approximately $5.3 billion. Monthly active users climbed 12% to hit 761 million, with both metrics marginally surpassing FactSet consensus estimates.

Premium subscribers, a critical performance indicator, rose 9% to 293 million, reflecting a net addition of 3 million new paying customers during the quarter. These figures painted a picture of steady, if unspectacular, momentum heading into the new leadership era.

Looking ahead, Spotify projected it would add 17 million net users in the current quarter to reach 778 million monthly active users, a target that slightly exceeded Wall Street’s expectations. However, the trouble emerged with its premium subscriber forecast. The company expects to add only 6 million new premium subscribers, growing that base to 299 million.

Analysts polled by FactSet had been anticipating a more ambitious climb to just over 300.4 million premium subscribers, exposing a gap between Spotify’s internal outlook and market hopes. The company itself acknowledged in an earnings presentation that its guidance remains “subject to substantial uncertainty,” adding a layer of caution to the otherwise stable operational update.

This earnings report marks a pivotal transition period for Spotify, as it was the first full quarter under new co-chief executive officers Alex Norström and Gustav Söderström. Founder Daniel Ek stepped down as CEO on January 1 to assume the role of executive chairman, leaving his successors to steer the company through intensifying competition and shifting consumer habits.

Despite the stock’s negative reaction, Söderström struck an optimistic tone, emphasizing the company’s strategic advantages. “We’re well positioned because of our large, engaged user base, deep creator relationships, and years of investment in personalization and infrastructure at scale,” he said in a statement. “We see significant room to grow across users, formats and engagement and to expand what Spotify is and can become over time.”