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Spotify posts quarterly profit, user growth beats expectations

A logo of Spotify is seen on a beach during the Cannes Lions International Festival of Creativity in Cannes, France, June 20, 2023. REUTERS/Eric Gaillard/File Photo
A logo of Spotify is seen on a beach during the Cannes Lions International Festival of Creativity in Cannes, France, June 20, 2023. REUTERS/Eric Gaillard/File Photo

On Tuesday, Spotify (SPOT.N) said it had earned a quarterly profit. Price increases for its streaming services and increased overall subscribers helped with this. The business also predicted that by the end of this quarter, the number of people who listen to it on a monthly basis will exceed 601 million.

With an operational income of 32 million euros ($34.1 million) for the third quarter, the company announced its first quarterly profit since 2021. This was made feasible thanks to a larger profit margin and reduced staffing and marketing expenditures.

The Chief Financial Officer of the business, Paul Vogel, stated that “we believe moving forward, we should see pretty consistent growth in our operating income.”

It predicted an operating income of 37 million euros for the current three-month period.

Spotify has been maintaining a tight handle on its spending after investing more than a billion euros into building up its podcast business. Earlier this year, the company laid off 6% of its personnel, and in July, it increased the rates for its premium plans. The corporation invested over one billion euros into developing its podcast business.

According to Reuters’ quote from Daniel Ek, the company’s chief executive officer, “We are still focusing on efficiencies; however, for us, efficiencies do not simply mean cost-cutting; rather, it means getting more out of each dollar.”

The gross margin for July through September at Spotify was 26.4%, 166 basis points more than for the same period a year earlier.

“We do expect to continue to see margin expansion into next year,” said Vogel in an interview on the company’s expectations.

In the third quarter, the number of monthly active users for the firm climbed by 26%, reaching 574 million. This amount is higher than both the company’s forecast of 565.7 million and the analysts’ prediction of 565.7 million.

The projected number of premium members was 223.7 million, but according to data from LSEG and IBES, the actual number of premium members increased by 16% to 226 million, exceeding the projection. Premium subscribers are responsible for most of the revenue the firm generates.

The revenue climbed by 11%, reaching a total of 3.36 billion euros, which was higher than the 3.33 billion euro estimates made by analysts.

According to Spotify’s monthly user projection for the fourth quarter, the company will attain 1 billion subscribers and $100 billion in annual revenue by 2030. These targets were revealed earlier this year. Before the event, analysts anticipated that there would be 591.2 million listeners.

In addition, it forecasts that it will have more than 235 million premium members by the end of the year’s third quarter and 3.7 billion euros in revenue by the end. The prediction of 232.4 million premium clients and income of 3.69 billion euros was what industry analysts were expected to see in the future.

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