Audio streaming giant Spotify reported better-than-expected third-quarter subscriber gains and a surprise operating profit.
The company ended September with 226 million paying premium subscribers, up from 220 million as of the end of June, exceeding its forecast that it would reach 224 million in the latest period.
Stockholm-headquartered Spotify, led by CEO Daniel Ek, also reported that it hit 574 million monthly active users (MAUs) as of the end of the third quarter, up from 551 million at the end of the second quarter. The company had previously estimated it would end the latest period with 572 million MAUs.
“The business delivered strong results in the third quarter, as all of our key performance indicators exceeded guidance,” the company said.
Third-quarter revenue jumped 11 percent to €3.36 billion ($3.57 billion), as advertising revenue rose 16 percent despite macroeconomic headwinds, driven by podcasting and the Spotify Audience Network, among other things. “Ad-supported revenue grew 16 percent year-over-year (or 24 percent on constant currency), reflecting double-digit year-over-year growth across all regions,” Spotify said. “Music advertising revenue re-accelerated and grew nearly 20% year-over-year, driven by growth in impressions sold and stable pricing. Podcast advertising revenue growth remained in the healthy double-digit range, driven by significant year-over-year growth in sold impressions across original and licensed podcasts and the Spotify Audience Network, which was partially offset by softer pricing.”
The music streamer, which has been stepping up its focus on profitability, also swung to a quarterly operating profit of €32 million ($34 million), compared with a year-ago loss of €228 million. As key drivers, it “higher gross margin,” helped by subscriber growth and the early impact of price increases, “as well as lower-than-expected personnel and related costs, and marketing spend.”
Amid escalating costs, Spotify has been undertaking several cost-cutting measures. The streaming giant laid off 200 employees in June, after previously laying off 600 employees in January and conducting layoffs in October. The company has also made programming cuts, including ending its exclusive podcasting deal with Prince Harry and Meghan Markle in June. And Spotify merged podcasting studios Parcast and Gimlet into a single division after canceling 10 shows from the two companies.
In late July, Spotify also unveiled that it would increase prices on its premium plan, bringing the cost to $10.99 per month.
In its forecast for the current fourth quarter, Spotify projected that it would end 2023 with 235 million premium subscribers, implying growth of about 9 million in the final quarter, and 601 million monthly active users, a gain of around 27 million. The music streamer also predicted a fourth-quarter operating profit of €32 million
