Internet radio company Pandora stock took a beating today in after-hours trading due to dismal fiscal year 2013 Q3 earnings results.

On the surface, it appears that Pandora is doing well, as it posted $120 million in revenue for the quarter, up 60 percent from the same period last year. It’s mobile revenue more than doubled compared to last year at $73.9 million, and its listener hours were also up, reaching 3.56.

But what shareholders are taking issue with is the exuberant amount of money Pandora is spending to maintain its library of licensed popular music, which is preventing the company from once again turning a profit.

Pandora is also predicting a rough FYQ4, which makes its overall year look bad. The company expects a loss of 9 cents to 12 cents per share on revenue of $422 million to $425 million for the fiscal year. That’s off from Wall Street’s expectations of a 6 cent loss on revenue of $429.3 million.

The earnings call is beginning now, and we’ll update this post with new commentary from the executive team on what it plans to do to remain a viable business going forward.

Update: Pandora CEO Joe Kennedy said the disappointing FYQ4 (and fiscal 2013) guidance comes from an anticipation that advertising spending will be done. This, he attributes to a number of reasons, including the impending fiscal cliff, the lack of political campaign spending, and the market generally slowing down for the last quarter after the holiday shopping blitz.

But shareholders are looking for any excuse to bail on Pandora, even if all of those factors mentioned above are valid reasons for lower revenue. Kennedy’s other talking point, which several people tend to agree with, also probably didn’t exactly restore confidence in shareholder.

During the call, Kennedy also reiterated his position that music licensing royalties are the biggest problem for the company. (It’s the same position he took when speaking at a Congressional hearing on the reform of copyright licensing reform last week, as VentureBeat reported.) With Pandora paying out over half its revenue in music royalty fees, it leaves little room for profit, especially when these fees increase over time. The solution, he said, is for Congress to intervene by giving Internet radio stations a rate that’s comparable to satellite, cable, and the traditional radio businesses.

But since that argument is largely dependent on swaying congress, you can imagine why shareholders wouldn’t be very confident.

Key stats at a glance:

• 3Q13 total revenue of $120.0 million grew 60 percent year-over-year
• 3Q13 total mobile revenue of $73.9 million grew 112 percent year-over-year
• 3Q13 total listener hours of 3.56 billion grew 67 percent year-over-year
• Active users reach 59.2 million, growing 47 percent year-over-year

Streaming music service Pandora reported better than expected revenue gains in its second quarter fiscal year 2013 earnings report.

The company’s revenue for FY13 second quarter was $101.3 million, a 51 percent increase compared to the same quarter last year and $20.5 million higher than the previous quarter. The bulk of revenue came from advertising, $89.4 million, with premium subscriptions accounting for $11.9 million. Yet Pandora’s profits are still down, with a $5.4 million net loss for the quarter compared to $1.8 million year-over-year.

The cost for licensing all its streaming music is one of the largest contributors to Pandora staying in the red. Pandora is one of the world largest Internet radio services, which allows people to create customized stations based on an artist, song, album, or genre by voting on what they do and don’t want to hear. The company offers a free ad-supported version of its smart radio service as well as premium subscription-based version. Pandora is also facing increased competition from a number of popular competitors like Spotify, which launched its own smart radio features earlier this year.

“This quarter exceeded our expectations as our strong momentum continues with both listeners and advertisers,” said Pandora Chairman and CEO Joe Kennedy in a statement. “In particular, this quarter demonstrated that our mobile monetization strategies are working.”

Mobile is one area where Pandora is doing very well, bringing in $59.2 million in mobile ad revenue for an 86 percent year‐over‐year increase. The company is also pushing get its music service into more automobiles while slowly but steadily building an advertising sales workforce to steal business from the local radio ad market.

Pandora’s financials might be largely unchanged compared to the last few quarters (record revenue growth while failing to turn a profit), but at least people are still listening. The company grew the total number of listener hours (amount of time people actually spend listening to Pandora content) to 3.3 billion for the fiscal quarter, an 80 percent year‐over‐year increase. The company also saw 54.9 million active users for the quarter for a 48 percent year-over-year increase.

The continued user growth and higher level of listener hours is one thing that could be keeping Pandora’s stock price from sinking even lower. The company experienced a setback earlier in the month when Wall Street downgraded its rating, causing the stock to dip below $10 per share. For now, it’s been able to hold that number, but investors don’t seem overly convinced that Pandora can overcome its high music licensing costs to actually turn a profit.