Pandora Media, the operator of the Web's top radio service, reported its biggest quarter of profit since it went public, affirming expectations that investments to soup up its advertising engine would pay off.
But investors weren't celebrating, as they looked to the company's first-quarter guidance to find a wider loss than expected. Shares fell 8.7 percent to $32.71 in after-hours trading.
Chief Executive Brian McAndrews said the company would continue to "aggressively invest" this year, focusing most on building revenue and capturing a bigger audience.
The quarter was also complicated by Pandora's transition from a fiscal reporting calendar to a typical one. As part of Pandora's switch to a reporting schedule that begins on the first day of every year, it reported results for a three-month period ended December 31, which sets the pattern for its results going forward, as well as results for a "stub" period of only two months.
They come as competition in online music services is increasing, though Pandora has prided itself in continuing to grow even as new rivals crop up. Pandora continues to lead the market by number of listeners, while giants like Apple and Google added new services like iTunes Radio and All Access last year and new smaller startups like Spotify offered up new listening options.
The company has also been a darling of investors for carefully cultivating its ad-sales operation, adding local sales forces and introduce more and different kinds of ads. Through Wednesday's close, the stock has more than tripled in value in the last year.
In the three-month period, it posted a profit of $9 million Wednesday, or a 4 cents a share, compared with $1.6 million, or a penny a share, a year earlier. Stripping out unusual items, per-share profit rose to 11 cents from 5. Analysts on average were expecting 7 cents a share.
Revenue jumped 52 percent to $200.4 million, compared with analysts' consensus estimate of $201.1 million.
Pandora's guidance for the current quarter was for a loss of 14 to 16 cents a share on revenue of $170 million to $176 million. Analysts were expecting a loss of 12 cents a share on $171.7 million in revenue.