Spotify's stock surges to highest level in more than 3 months after revenue, MAU beats

Shares of Spotify Technology S.A. /zigman2/quotes/207488629/composite SPOT +2.13% shot up more than 10% before paring gains to be up 5.8% toward a 3 1/2-month high in morning trading Wednesday, after the Luxembourg-based music streaming service reported better-than-expected revenue, MAUs, free cash flow (FCF) and gross margin, but a wider-than-forecast loss. Revenue rose 26.6% to EUR2.50 billion ($2.91 billion), above the FactSet consensus of EUR2.45 billion, citing "significant strength in advertising," while monthly active users (MAUs) rose 19% to 381 million to beat expectations of 380.2 million, amid double-digit growth in all geographic regions. FCF was EUR99 million, down from EUR103 million a year ago, but above expectations of EUR93.4 million. Gross margin improved to 26.7% from 24.8%, topping the guidance range provided in July of 24.4% to 26.4%. Meanwhile, the company reported a per-share loss that narrowed to EUR0.41 from EUR0.58, but that FactSet loss consensus of EUR0.21. For the fourth quarter, Spotify expects revenue of EUR2.54 billion to EUR2.68 billion, compared with the FactSet consensus of EUR2.58 billion. The stock has rallied 12.6% over the past three months, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.44% has gained 4.1%.