Spotify has released its latest financial report. According to the report, the company saw an annual increase of over 10% in both its paid and free user base. While the company had posted a profit in the same quarter last year, it once again recorded a loss this quarter.

Spotify’s €406 Million Revenue Falls Short of Expectations

Spotify’s subscriber count increased by 12% compared to the same period last year, reaching 276 million. Monthly active users also rose by 11% to 696 million. Spotify’s total revenue grew by 10% year-on-year to €4.2 billion. The gross profit margin expanded by 227 basis points annually to 31.5%. The company’s operating income, however, came in at €406 million.

The company’s operating income of €406 million fell short of expectations due to “Social Costs,” high salaries, and changes in its revenue mix. The “Social Costs” item exceeded estimates by €98 million as a result of the increase in share prices during the quarter.

For Spotify, which is headquartered in Sweden, this situation is directly linked to the country’s tax system. In Sweden, companies’ payroll taxes increase proportionally with their stock prices.