Spotify's user growth beats expectations, posts quarterly profit

Stockholm: Streaming giant Spotify on Tuesday reported quarterly monthly active users and subscribers ahead of expectations as it grew in all regions, and forecast that the number of monthly listeners would reach 601 million in the final three months of 2023.

The company posted a third quarter operating income of 32 million euros ($34.08 million), its first quarterly profit since 2021, helped by a higher gross margin and lower marketing and personnel costs.

Its gross margin rose to 26.4 per cent in the July-September period, up 166 basis points from the year-earlier period.

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 across several countries.

The number of monthly active users rose 26 per cent to 574 million in the third quarter, beating Spotify's guidance and analysts' forecast of 565.7 million.

Premium subscribers, who account for most of the company's revenue, rose 16 per cent to 226 million, topping estimates of 223.7 million, according to IBES data from LSEG.

Revenue rose 11% to 3.36 billion euros, beating estimates of 3.33 billion.

Ad-Supported revenue grew 16 per cent from a year earlier as music advertising revenue re-accelerated, driven by growth in impressions sold and stable pricing, the company said. Podcast advertising also grew by double digits.

Spotify's monthly user forecast for the fourth quarter sets the company firmly on target to reach 1 billion users and $100 billion of revenue annually by 2030. Analysts had expected a forecast of 591.2 million listeners.

It also expects premium subscribers to reach 235 million in the last three months of the year and revenue to reach 3.7 billion euros. Analysts were expecting a forecast of 232.4 million premium subscribers and revenue of 3.69 billion euros.

($1 = 0.9391 euros)