Q1 25 RESULTS - CFO mentioned regulatory risk in Europe.
"In addition, we continue to monitor an active regulatory landscape, including legal and regulatory headwinds in the EU and the U.S. that could significantly impact our business and our financial results. The European Commission (EC) recently announced its decision that our subscription for no ads model is not compliant with the Digital Markets Act (DMA). Based on feedback from the EC in connection with the DMA, we expect we will need to make some modifications to our model, which could result in a materially worse user experience for European users and a significant impact to our European business and revenue as early as the third quarter of 2025. We will appeal the EC's DMA decision but any modifications to our model may be imposed before or during the appeal process."
Earnings presentation shows European revenue represents 23% of total. The regulatory pressure has recently increased against the top tech players, also in the US. The EU has been on the warpath for some time.
Normally the word "significant" in results announcements indicates serious impact to profitability and outlook.
Analysts have been concerned about the investments in AI, but regulatory risk may be more critical in the short term.
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