Spotify forecasts profit and monthly active users below estimates, shares fall

Aug 4 (Reuters) - Spotify forecast third-quarter profit and monthly active users below Wall Street estimates on Tuesday, underscoring the streaming service's challenges in maintaining growth despite expanding its offerings of AI-based features to fend off competition.

Shares of the company were down around 4% in premarket trading.

The company has launched AI features like "Personal Podcasts" and new offerings such as "Reserved" to attract more users and fend off competition from rivals including YouTube and Netflix, and AI music startups like Udio and Suno.

Separately on Tuesday, Spotify announced a new agreement with digital music licensing firm Merlin for the Swedish company's upcoming paid tool for fan-made covers and remixing. It will allow artists on labels under Merlin's Spotify agreement to participate.

The company said it expects operating income of €670 million ($770.97 million) in the third quarter, below analysts' average estimates of €677.8 million, according to data compiled by Visible Alpha.

In the second quarter, its operating income came in at €655 million, beating estimates of €639.2 million, driven by strong revenue growth and lower payroll taxes.

Such taxes, called social charges, are tied to the value of the company's share price. The company's stock has fallen about 16% so far this year.

Spotify's quarterly revenue rose 14% to €4.78 billion, slightly below LSEG-compiled estimates of €4.80 billion. The revenue forecast of €5 billion for the third quarter was slightly above estimates of €4.93 billion.

Its monthly active users forecast of 788 million was below Visible Alpha estimates of 793.6 million, while its outlook for a 5 million increase in premium subscribers to 305 million was largely in line with estimates.

($1 = 0.8690 euros)

(Reporting by Jaspreet Singh in Bengaluru; Editing by Leroy Leo)