Spotify swings to profit as user growth beats expectations
Spotify on Tuesday swung to a quarterly profit aided by price hikes in its streaming services and growth in subscribers in all regions, and forecast that its number of monthly listeners would reach 601m in this quarter.
The company posted a third-quarter operating income of 32m euros ($34.1 m), its first quarterly profit since 2021, helped by a higher gross margin and lower marketing and personnel costs.
“We believe moving forward, we should see pretty consistent growth in our operating income,” its Chief Financial Officer Paul Vogel said.
It forecast operating income of 37m euros in the current quarter.
After spending more than a billion euros in building up its podcast business, Spotify has been keeping a tight lid on costs, laying off 6 per cent of its employees earlier this year and in July raising prices for its premium plans.
“We are still focusing on efficiencies, but efficiencies for us doesn’t mean just cost cutting, it means getting more out of each dollar,” CEO Daniel Ek told Reuters
Spotify’s gross margin rose to 26.4 per cent in the July to September period, up 166 basis points from a year earlier.
“We do expect to continue to see margin expansion into next year,” Vogel said in an interview.
The company’s number of monthly active users rose 26 per cent to 574m in the third quarter, beating its own guidance and analysts’ forecast of 565.7m.
Premium subscribers, who account for most of the company’s revenue, rose 16 per cent to 226m, topping estimates of 223.7m, according to IBES data from LSEG.
Revenue rose 11 per cent to 3.36bn euros, beating estimates of 3.33 billion.
Spotify’s monthly user forecast for the fourth quarter sets the company firmly on target to reach 1bn users and $100bn in revenue annually by 2030. Analysts had expected a forecast of 591.2m listeners.
It also expects premium subscribers to reach 235m in the last three months of the year and revenue to reach 3.7bn euros. Analysts were expecting a forecast of 232.4m premium subscribers and revenue of 3.69bn euros.
Reuters – by Supantha Mukherjee