Swedish music streaming service Spotify has posted a narrowed quarterly loss as the number of paying subscribers grew, while reporting a disappointing overall user growth.

"Most of our major metrics... performed better than expected this quarter," the company said.

"The exception was MAUs (Monthly Active Users), where we fell short of our guidance range," it added.

Monthly active users grew 22% compared to the second quarter of 2020, reaching 365 million, coming in just below the expected range of 366 and 373 million.

The underperformance was "due primarily to lighter user intake during the first half of the quarter," according to Spotify.

"Covid-19 continued to weigh on our performance in several markets, and, in some instances, we paused marketing campaigns due to the severity of the pandemic," the company said.

Paying subscribers, which account for the bulk of revenue, however grew 20% compared to the same period a year earlier, reaching 165 million, putting it "towards the upper end of our guidance range and modestly ahead of forecast."

Despite posting a rare profit in the first quarter of 2021, the business continues to operate at a loss, to fuel an aggressive growth strategy.

For the period of April to June, Spotify recorded a net loss of €20m, beating expectations of analysts who were on average predicting a loss of €70m.

It was also vastly better than the second quarter of 2020, when it reported a loss of €356m as the result was weighed by the good performance of its share.

The former Stockholm-based start-up uses a mechanism for remunerating its employees that is indexed to the share price, causing compensation to soar with the share.

In the third quarter, Spotify expects to gain between five and nine million paying subscribers and between 12 and 17 million active users, which would bring it closer to the symbolic 400 million threshold, which it hopes to cross before the end of the year.

It projects between 400 and 407 million active users by the end of 2021.