By Supantha Mukherjee and Kenneth Li
(Reuters) - Spotify Technology SA's paid music subscribers surged to 130 million in the first quarter, driving shares in the Swedish music streaming firm higher as its business model proved more resilient than expected in the coronavirus lockdowns.
A double-digit rise in quarterly revenue helped the company weather a virus-related decline in ad sales, which contributed less than 10% to overall revenue.
But Spotify, which earns by a mixture of subscriptions and showing ads to non-paying users, continued to solidify its commercial lead in streaming over Apple Inc and Amazon.com Inc.
"Despite all the turbulence around the world, we hit pretty much all the metrics," Spotify Chief Executive Daniel Ek told Reuters.
The company said it started seeing a fall in users in late February in virus-affected countries such as Italy and Spain, but has seen meaningful recovery in the last few weeks.
Ek credited the company's more than 300 partnerships with device makers and its expansion into podcasts as a few reasons for its continued appeal to an audience now trapped at home.
"Work from home appears to be increasing streaming services in general, so we don't see users choosing between Netflix and Spotify," Cascend Securities analyst Eric Ross said.
While usage on mobile devices and in cars dropped in the last few weeks of March, usage on video game consoles such as Microsoft Corp's Xbox and Sony Corp's PlayStation surged during the first quarter.
Overall, monthly active users, a key metric, rose 31% in the quarter, in line with Spotify's forecast.
Spotify's subscriber and user metrics proved resilient, while the ad business was challenged, which is less of a focus, Evercore analyst Kevin Rippey said.
For the second quarter, Spotify expects premium subscribers in the range of 133 million to 138 million. Analysts were expecting 136.5 million, according to IBES data from Refinitiv.
It forecast total revenue in the range of 1.75 billion euros ($1.90 billion) to 1.95 billion euros, below expectation of 2.02 billion euros.
First-quarter premium subscribers rose 31% from a year earlier. Analysts were expecting 128.6 million.
Revenue rose 22% to 1.85 billion euros, but missed the average analyst estimate of 1.86 billion euros.
For 2020, Spotify reduced its revenue target to 7.65 billion to 8.05 billion euros from 8.08 billion to 8.48 billion euros due to changes to foreign exchange rates and a lower ad sales expectations.
Shares of Spotify rose 10% to $153.19 in trading before the bell on the New York Stock Exchange.
($1 = 0.9215 euros)
(Reporting by Supantha Mukherjee in Bengaluru and Kenneth Li in New York; Editing by Arun Koyyur and Shinjini Ganguli)