Spotify shares fell 11% before Tuesday’s market open after first-quarter earnings showed slower subscriber growth than expected. This has led to concerns that higher prices are deterring new customers in a market sensitive to price changes.

Spotify reported adjusted earnings per share of €3.45, beating the analyst consensus of €2.95. Revenue was €4.5 billion, up 8% from last year. The company expects to add 6 million premium subscribers next quarter, bringing its total to 299 million, slightly short of Wall Street’s 300 million target. Some now question if Spotify’s pricing strategy is working.

In February, Spotify raised the monthly price of an individual premium subscription in the U.S. from $11.99 to $12.99. The company aimed to improve profit margins and boost value, but the higher price appears to have slowed subscriber growth. Spotify expects operating income of €630 million for the second quarter, below the €680 million that analysts predicted. This suggests that some subscribers may be unwilling to pay the increased price, which is disappointing to investors.

These results come at a difficult time for Spotify’s stock, which had already dropped about 15% this year before Tuesday. Investors remain uncertain whether Spotify can raise profit margins fast enough to support a valuation around 33 times its expected 2026 earnings, especially as subscriber growth slows after the price hike. The latest subscriber forecast intensifies doubts about the company’s ability to keep raising prices without hurting user growth.

The earnings report follows Monday’s news of a global partnership with Peloton. This deal will add fitness and wellness content for Spotify’s premium subscribers. The aim is to make the platform more valuable, help retain current subscribers, and attract new ones.