Swedish audio-streaming giant, Spotify, has reported a record quarterly profit, causing its shares to rise over 14% in premarket trading by reducing costs through layoffs and cuts to its marketing budget last year, while simultaneously expanding its user base through promotions and new investments in podcasts.
In the second quarter of 2024, Spotify saw its number of paying subscribers increase to 246 million, just above expectations. CEO Daniel Ek attributed this growth to the company’s diverse subscription offerings. “It really comes down to the number of subscription offerings we have now. We’re moving from one-size-fits-all to having something for everyone,” Ek said in an interview with Reuters, while highlighting various plans for students and shared households.
Spotify’s profit rose 45% from the previous year to 1.11 billion euros ($1.21 billion), slightly exceeding analysts’ expectations of 1.07 billion euros. Earnings per share reached 1.33 euros, beating estimates of 1.06 euros according to IBES data from LSEG. Revenue for the second quarter increased by 20% to 3.81 billion euros, just below analysts’ projections of 3.82 billion euros.
However, the company fell short of its own target for monthly active users (MAUs). Spotify had aimed for 631 million MAUs but only achieved 626 million for the quarter.
Spotify explained the shortfall in MAUs as a result of a “continued recalibration” of marketing activities. CEO Ek addressed the issue, stating, “It’s definitely something we take very seriously, if we miss our own forecasts. For me, it’s a question of when, not if. We will return to strong MAU growth; I feel good about it.”
The company’s gross profit margin also improved, widening to 29.2% from 27.6% in the previous quarter. Despite missing its MAU target, Spotify’s strong financial performance and strategic adjustments have positioned it for continued growth.
