Spotify (SPOT) reported its quarterly earnings at $1.59 per share, falling short of the Zacks Consensus Estimate of $1.75 per share. This marks a significant increase compared to the earnings of $0.36 per share recorded in the same quarter last year, reflecting the company’s ongoing growth trajectory. It’s worth noting that these earnings figures have been adjusted for non-recurring items.
This quarterly report reflects an earnings surprise of -9.14%, indicating that the performance was not as robust as analysts had anticipated. In the previous quarter, expectations were set at $1.08 per share, yet Spotify outperformed those forecasts by achieving $1.43 per share, culminating in a notable surprise of 32.41%.
Over the last four quarters, the company has successfully exceeded consensus EPS estimates on two occasions, showcasing its potential for growth despite this quarter’s setback.
In terms of revenue, Spotify, operating within the Zacks Technology Services industry, reported impressive earnings of $4.38 billion for the third quarter ending September 2024. This figure not only surpasses the Zacks Consensus Estimate by a narrow margin of 0.36% but also reflects substantial growth from the $3.65 billion generated in the same quarter last year. The company has managed to exceed consensus revenue estimates on two occasions within the past four quarters.
The immediate future price movement of Spotify’s stock, influenced by the recently released financial numbers and management’s future earnings expectations, heavily hinges on the insights provided during the earnings call. Investors are keen to hear guidance that could shape their buying or selling decisions.
Spotify’s shares have soared approximately 118.3% since the start of this year, significantly outpacing the S&P 500 index, which has seen a gain of 25.8%. This performance raises the question among investors: What lies ahead for Spotify?
While straightforward answers remain elusive, one vital metric that investors can use to gauge future performance is the company’s earnings outlook. This encompasses not only the current consensus earnings expectations for the upcoming quarters but also the trends in those expectations over recent weeks.
Empirical evidence indicates a strong connection between short-term stock movements and the revisions in earnings estimates. Investors are advised to monitor these revisions independently or utilize established rating tools like the Zacks Rank, which boasts a proven track record in leveraging earnings estimate changes to predict stock performance.
Ahead of this earnings release, the trend in estimate revisions for Spotify appears mixed. Although the recent earnings report may alter the magnitude and direction of estimates, the current standing results in a Zacks Rank #3 (Hold) classification for the stock, suggesting that it is expected to perform in line with the broader market in the near term.
Investors should keep an eye on how estimates for the upcoming quarters and the current fiscal year evolve in the coming days. Currently, the consensus EPS estimate stands at $2.06 on $4.63 billion in revenues for the upcoming quarter and $6.24 on $17.07 billion in revenues for the ongoing fiscal year, revealing the market’s expectations for continued growth.
The industry’s performance outlook is also crucial, as it can significantly influence stock performance. The Zacks Industry Rank places Technology Services in the top 26% of over 250 Zacks industries, indicating a hopeful environment for growth. Research shows that industries ranked in the top 50% by Zacks consistently outperform those in the lower half by a ratio exceeding 2 to 1.
UiPath (PATH), another key player in the same industry, has yet to announce its results for the quarter ending October 2024, with earnings expected to be disclosed on December 5. Analysts are anticipating quarterly earnings of $0.07 per share, reflecting a year-over-year decline of 41.7%. The consensus EPS estimate has remained stable over the past month.
The expected revenues for UiPath are projected to reach $347.65 million, marking a 6.7% increase from the previous year, indicating that even amid challenges, revenue growth persists.
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**Interview with Financial Analyst, Jane Doe, on Spotify’s Recent Earnings Report**
**Editor:** Thank you for joining us today, Jane. Spotify’s recent quarterly earnings report has caught the attention of investors. Can you break down the key takeaways for us?
**Jane Doe:** Absolutely! Spotify reported earnings of $1.59 per share, which is below the Zacks Consensus Estimate of $1.75. However, it’s important to note that this does represent substantial growth compared to $0.36 per share from the same quarter last year. So, while they missed the estimates, they are still on a positive growth trajectory.
**Editor:** That’s an interesting point. Despite the shortfall in earnings, Spotify seems to have performed well in terms of revenue. Can you elaborate on that?
**Jane Doe:** Yes, revenue for Spotify reached $4.38 billion, exceeding the consensus estimate by 0.36% and showing significant growth from $3.65 billion during the same quarter last year. This indicates that while earnings were below expectations, the company is still expanding its top line, which is crucial for its overall health.
**Editor:** Looking at the future, how do you think investors should interpret Spotify’s earnings call and guidance for the upcoming quarters?
**Jane Doe:** The earnings call is crucial, as many investors are looking for insights into management’s expectations for future earnings. Given that the stock has increased about 118.3% since the start of the year, investors will be keen to hear guidance that can impact their buying or selling behavior. The overall consensus for the upcoming quarters is fairly optimistic, with expectations for continued revenue growth.
**Editor:** With Spotify’s stock performance exceeding that of the S&P 500 substantially, what factors do you think are driving this disparity?
**Jane Doe:** Spotify’s impressive stock performance can largely be attributed to its ability to capture and engage a younger audience, particularly Gen Z and millennials. Additionally, the company’s focus on diversifying content and increasing subscriber numbers has resonated well in an increasingly competitive market. However, the mixed trend in estimate revisions suggests that investors should closely monitor forthcoming earnings updates.
**Editor:** You mentioned that Spotify has a Zacks Rank #3 (Hold) classification. What does that tell us about the stock’s future expectations?
**Jane Doe:** A Zacks Rank of #3 indicates that Spotify is expected to perform in line with the broader market. While it’s not a sell, it suggests that investors should be cautious and watch for further revisions in earnings estimates. It’s essential to look for signals of growth, particularly in the upcoming quarters, as the stock’s performance could vary significantly based on earnings outlook adjustments.
**Editor:** what advice do you have for investors who are closely monitoring stocks in the tech services industry, especially with players like UiPath also making headlines?
**Jane Doe:** Investors should keep a sharp eye on industry performance and trends in earnings estimates as these can directly influence stock movements. It’s critical to evaluate individual companies’ earnings calls and outlook reports. Companies in top sectors like Technology Services—currently in the top 26% as per Zacks—tend to outperform others, so identifying the right stocks to watch can offer potential upside. It’s a dynamic environment, and informed investment decisions are key.
**Editor:** Thank you, Jane, for your insights on Spotify and the broader market dynamics. It seems investors have a lot to consider as they navigate this evolving tech landscape.
**Jane Doe:** Thank you for having me! It’s always important to stay informed in this rapidly changing market.