Spotify (NYSE:SPOT) is gearing up to unveil its fiscal first-quarter earnings on Tuesday before the bell, with Wall Street anticipating the music streaming giant to transition to profitability on an adjusted basis, driven by its ongoing “efficiency” strategy.
In the past year, Spotify has embarked on multiple rounds of workforce reductions and implemented price adjustments, among other initiatives, aimed at bolstering revenue growth and enhancing margins. Additionally, the company has signaled a more cautious approach to future investments, particularly after allocating significant funds toward expanding its presence in the competitive podcasting market.
During the company’s fourth-quarter earnings call in February, Spotify CEO Daniel Ek emphasized a stricter criterion for new investments, stating, “The hurdle rate for any new type of investments will be much higher than what it has been.”
In line with its focus on profitability, Spotify is reportedly set to raise prices once again, with planned increases of $1 to $2 per month in five markets, including the United Kingdom, Australia, and Pakistan, expected to roll out by the end of April, with similar adjustments for US subscribers anticipated later in the year.
Here’s a breakdown of what analysts anticipate for the upcoming earnings report, based on Bloomberg consensus estimates:
- Revenue: €3.61 billion versus €3.04 billion in Q1 2023
- Adjusted Earnings Per Share: €0.65 versus adjusted loss of €1.16 in Q1 2023
- Total Monthly Active Users (MAUs): 618 million versus 515 million in Q1 2023
- Premium Subscribers: 239 million versus 210 million in Q1 2023
Overall, analysts have expressed bullish sentiments towards Spotify, particularly following the company’s commitment to enhance profitability starting in 2023, with a focus on gross margin and operating income improvements.
Spotify’s stock has witnessed remarkable growth, surging over 100% in the past year and posting a 43% increase year-to-date. Macquarie analyst Tim Nollen underscored the positive outlook for profitability, maintaining an Outperform rating on shares and raising the price target to $330 from $300.
The company has guided to gross margins of 26.4% in Q1, with long-term expectations set between 30% and 35%, as Spotify aims to further expand its podcasting and ads business.
Despite significant investments in the podcast market, which weighed on profitability, Spotify’s strategic realignments, including executive changes and content distribution adjustments, reflect a concerted effort to prioritize profitability and streamline operations.
As Spotify prepares to announce its earnings, investors will be closely watching for updates on its financial performance, particularly in light of its evolving strategy and initiatives aimed at driving sustainable growth and profitability in the long term.
Featured Image: Megapixl
Author Faith Yakubu 
