(Bloomberg) — Spotify Technology SA avoided an advertising slowdown in the second quarter, escaping the fate of other tech stocks, like Snap Inc., which took a hit from lower ad spending.
The music-streaming service said Wednesday that advertising sales generated 360 million euros ($365 million) last quarter, an increase of 31% from a year ago. Advertising accounted for 13% of the company’s total revenue in the quarter.
Spotify shares rose as much as 15%, their biggest intraday gain since December 2020. The stock had fallen 56% so far this year through Tuesday’s close.
Other encouraging news from the earnings report included Spotify’s paid subscribers rising to 188 million, exceeding the 187 million projected by analysts and factoring in the expected loss of 600,000 Russian subscribers. Monthly active users and revenue also topped analyst estimates.
At the same time, gross margin, the primary focus of investor angst last quarter, continued to drop. The company’s decision to stop manufacturing Car Thing, a Bluetooth-enabled device for controlling Spotify in a vehicle, cost the company 31 million euros.
During a call with analysts, Chief Financial Officer Paul Vogel said the decision to cease production partially had to do with difficulty finding an attractive price point for the service.
“This initiative has unlocked helpful learnings, and we remain focused on the car as an important place for audio,” the company said in an emailed statement.
On Wednesday, the company said it would launch an audiobook product during the third quarter, a widely anticipated growth area for the company following its acquisition of Findaway, an audiobook creation and distribution platform.
(Update with comments from earnings call beginning in sixth paragraph.)
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