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Spotify faults itself for margin gains; stock hits new lows

By Eric Auchard and Olof Swahnberg

LONDON/STOCKHOLM (Reuters) – Spotify (N:SPOT) sent its shares tumbling as much as 10 percent on Thursday after the world’s most popular paid music streaming service said it would continue to sacrifice profit margins to generate future growth.

The Swedish company came close to making its first-ever operating profit in the third quarter, years ahead of schedule, which the company said was because it had not been spending heavily enough to hire more engineers.

“Operating margin improvement in Q3 was largely due to shortfalls in hiring,” the company said in a statement, adding that its failure to spend more on hiring was continuing in the fourth quarter.

Spotify pledged to accelerate the pace of investments in research and development in new music services and additional content during 2019, which the company said would reduce its operating margins “for the foreseeable future.”

Hit by the global tech stock sell-off over the past month, Spotify’s shares have given up their 30 percent gain since their stock market debut in April on the New York Stock Exchange.

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