Spotify stock soars on Q2 revenue and subscriber growth

Yahoo Finance's Allie Canal joins the Live show to discuss second-quarter earnings for Spotify.

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BRAD SMITH: We're also tracking shares of SPOT, S-P-O-T. Spotify reporting earnings with total users and revenue beating earnings estimates. Yahoo Finance's Ali Canal now joins us now to discuss. Ali, what do you know about Spotify and what they've reported here?

ALEXANDRA CANAL: Well, Spotify, we've seen a wider loss than expected. But it really is that beat on revenue, that beat on subscribers that seems to be driving the stock higher. It was up as much as 10% premarket on the heels of that report. But now we're seeing it nearly 13% since the opening bell.

So a pretty strong quarter overall. Revenue coming in at 2.91 billion versus the expected 2.85 billion. Again, that adjusted loss wider than expected, $0.86 a share versus the estimated $0.72. But total monthly active users, that is increasingly an important element for a lot of these streaming companies, 433 million versus the expected 428 million. And those are net additions of 19 million, they represented the company's largest ever growth in Q2. So that's pretty significant there.

And expectations set even higher for Q3. The company says it expects to add 450 million users. But guys, this company is not profitable, OK? We have a wider reported loss than expected. They are spending like crazy, especially on a lot of these podcast deals, a reported $200 million deal with Joe Rogan.

The vibe I'm getting is that they're really doing a long-term play here. They are telling investors, stick with us. There's going to be a lot to come with podcasts. Daniel Ek said during the investor day that the podcasting unit could generate 40% to 50% in margins. But we'll see if that actually happens. So it's a long-term play here, I think.

BRIAN SOZZI: Worth noting quickly, Spotify third hottest ticker page on the Yahoo! Finance platform. But to your point, Ali, and it is a correct one, at what point does this company consistently make money? It looks like the market is focusing on better than expected user growth. But at some point, they have to make money on these podcasts. These investments in podcasts, we just heard from them at a key investor day earlier this year, they need to start making money from this stuff, and soon, especially now after the stock is up 13%.

ALEXANDRA CANAL: Yeah. And I do think it's a positive thing that they're moving beyond just music, introducing podcasts, audiobooks, other types of formats. That's all good.

But to your point, they do need to make money. They do need to start being profitable, showing some better things on the balance sheet. And until then, I think investors are going to be waiting. But it's a question of how long are they going to wait before they start to get a little bit--

BRIAN SOZZI: We'll all be retired by that time.

ALEXANDRA CANAL: Exactly, right?

BRIAN SOZZI: We'll be done.

ALEXANDRA CANAL: But the stock-- again, the stock is doing really well. So investors, for now, are happy with where things are at.

BRAD SMITH: All right, investors might be leaning into that advertising revenue. That grew 31% during the quarter year over year, 13% of the total revenue right now. So we'll see how they continue to evaluate.

ALEXANDRA CANAL: Especially with the recession too, there could be a pullback there. So we'll have to monitor and see how things go.

BRAD SMITH: Yahoo Finance's own Ali Canal joining us here to break down Spotify earnings.