Spotify Turns Profit, Adds 6 Million Subscribers in Q3 Following Price Hikes and Cost Cuts

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Spotify reported its first profitable quarter in more than a year on Tuesday, after subscription price hikes, layoffs and marketing budget cuts helped boost revenues and operating income for music streaming and podcasting giant.

Spotify reported revenues for the third quarter rose 11% to 3.4 billion euros ($3.6 billion), and operating income over 32 million euros ($34 million). The company beat its growth guidance on both monthly active users and subscribers, adding 23 million monthly active users, a 26% uplift, for a total of 574 million compared to the year ago period. The number of premium subscribers rose by 6 million, or 16%, to 226 million from the year ago period.

The company said that the uptick in revenue is due to the early effects of its $1 price hike on premium individual plans and a rebound in the ad market, as improving podcasting trends and lower operating expenses after January’s company-wide cost cuts helped operating income turn a 1% profit.

The company told investors they could expect total monthly active users (MAU) and premium subscribers to continue to grow for the rest of the year–by 27 million net new MAUs and 9 million new subscribers in the fourth quarter 2023–which is expected to boost total revenues by 3% and gross margin by 0.2%.

Spotify reported a free cash flow of 216 million euros for the quarter, up from 25 million euros a year ago. As of Sept. 30, the company says it employed 9,241 full time employees worldwide, down from roughly 9,800 at the end of 2022.

Spotify has been managing a reboot of its podcasting strategy this year, moving away from the hundreds of millions of dollars acquiring podcast start-up and programing under former chief content officer Dawn Ostroff. Spotify now hosts over 100 million tracks, 5 million podcasts titles, and 350,000 audiobooks.

The company also benefitted from a rebound in ad-supported revenue, which rose 16% to 447 million euros ($475 million), helped by a 20% uptick in music. “Podcast advertising revenue growth
remained in the healthy double-digit range,” according to a Spotify release.

Monthly active users rose by 26% to 574 million, compared to the third quarter 2022, beating guidance by 2 million.

The number of subscribers rose by 16% to 226 million from the year ago period, also ahead of guidance by 2 million.

Ad-supported monthly active users rose by 32% to 361 million from the year ago period.

Total revenue rose 11% to 3.36 billion euros ($3.57 billion) from 3.04 billion euros ($3.2 billion).

Revenue from preimium subscriptions rose by 10% to 2.9 billion euros ($3.08 billion).

Revenue from ad supported users rose 16% to 447 million euros ($475 million).

Operating income was 32 million euros ($34 million), bosted by higher gross margin and lower personnel and marketing costs.

The company’s gross margin was 26.4%, compared to 24.7% in the third quarter 2022.

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