In a positive turn of events, Spotify (NYSE:SPOT) announced a quarterly profit, with a boost from increased pricing in its streaming services and robust subscriber growth across all regions. The company also anticipates a significant increase in its monthly listeners in the upcoming quarter, with a projected total of 601 million.
For the third quarter, Spotify reported an operating income of 32 million euros ($34.1 million), marking its first quarterly profit since 2021. This achievement was facilitated by a higher gross margin and reduced marketing and personnel costs. The company’s Chief Financial Officer, Paul Vogel, expressed optimism about the consistent growth of their operating income moving forward, with a forecasted operating income of 37 million euros for the current quarter.
Having invested over a billion euros in building its podcast business, Spotify has become more cost-conscious. This involved laying off 6% of its employees earlier in the year and raising prices for its premium plans in July. CEO Daniel Ek emphasized their focus on efficiency, which extends beyond cost-cutting to getting more value from each dollar spent.
Spotify’s gross margin increased to 26.4% during the July to September period, a 166-basis-point improvement from the previous year. Vogel indicated that they anticipate further margin expansion into the following year.
In the third quarter, the number of monthly active users for Spotify grew by 26%, reaching 574 million. This figure exceeded both the company’s own guidance and analysts’ expectations, which were set at 565.7 million. Premium subscribers, who contribute significantly to the company’s revenue, also increased by 16% to 226 million, surpassing estimates of 223.7 million.
Revenue for the quarter rose by 11% to 3.36 billion euros, beating analyst estimates of 3.33 billion euros. Spotify’s monthly user forecast for the fourth quarter aligns with the company’s ambitious goal to reach 1 billion users and achieve $100 billion in annual revenue by 2030, as analysts had predicted 591.2 million listeners.
Spotify also anticipates premium subscribers to reach 235 million in the last three months of the year and expects revenue to reach 3.7 billion euros. Analysts were looking for forecasts of 232.4 million premium subscribers and revenue of 3.69 billion euros. This performance reflects Spotify’s commitment to steady growth and financial stability in the highly competitive music streaming industry.
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Author Faith Yakubu 
