Spotify projected third-quarter profit below market expectations on Tuesday, citing increased tax expenses linked to employee compensation, despite strong demand for its premium subscription services.

Shares of the Swedish streaming platform dropped nearly 9% in early trading, even after gaining around 57% so far this year. Investors have been keeping a close watch on the company’s profitability following recent price hikes, cost-cutting measures, and rising subscriber numbers that helped Spotify report its first annual profit in 2024.

The company expects operating income of €485 million ($561 million) for the third quarter, falling short of the €562 million consensus estimate from LSEG data.

Spotify’s forecast of 710 million monthly active users (MAUs) aligns with expectations, while its premium subscriber projection of 281 million exceeds analysts’ estimates of 279 million. In the second quarter, premium subscribers rose 12% to 276 million, and total MAUs increased by 18 million to reach 696 million—both surpassing forecasts.

Despite a 10% year-over-year revenue increase to €4.19 billion ($4.85 billion) in Q2, the figure missed expectations of €4.26 billion. Spotify noted that currency fluctuations negatively impacted revenue growth by roughly 440 basis points.

Looking ahead, the company anticipates third-quarter revenue of €4.2 billion, which also falls below the market projection of €4.48 billion.

Meanwhile, Spotify’s board approved a $1 billion boost to its share buyback programme, increasing the total authorisation to $2 billion, with $1.9 billion available for repurchases through April 2026.

Rising competition from Apple and Amazon has led Spotify to ramp up marketing efforts, contributing to an 8% rise in operating expenses during the April–June period.

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