Spotify Reports Strong Earnings Growth in Q1 2024, Driven by User Growth and Ad Revenue

Spotify Technology S.A. reported strong financial results for the first quarter of 2024, with record profits driven by robust user growth and increased advertising revenue. The company's revenue surged to €3.636 billion ($3.9 billion), up 20% year-over-year, while gross profit exceeded €1 billion for the first time in a single quarter.

Spotify's monthly active users (MAUs) grew by 19% year-over-year to reach 615 million, slightly below the company's forecast of 618 million due to a slowdown at the start of the year. Premium subscribers, who account for the majority of Spotify's revenue, rose by 14% to 239 million. Despite missing its MAU target, Spotify achieved an operating income of €168 million ($180 million), a significant improvement from the loss of €156 million in the same period last year.

CEO Daniel Ek acknowledged that the company's workforce reduction of 17% in December 2023 was "more disruptive than anticipated" but maintained it was "the right strategic decision." Ek also revealed plans to increase marketing spending in the second quarter after pulling back too significantly in 2023. Additionally, Spotify intends to introduce price hikes later this year, with increases of $1 per month for individual plans and $2 per month for duo and family plans in select markets.

Why this matters: Spotify's record-breaking financial performance and continued user growth solidify its position as the leading music streaming platform. The company's ability to drive revenue growth and improve profitability, despite challenges posed by workforce reductions, highlights its resilience and adaptability in an increasingly competitive market.

Looking ahead, Spotify anticipates an operating profit of €250 million in Q2 2024 and aims to reach 631 million MAUs, including 245 million premium subscribers. The company remains focused on enhancing monetization, expanding its content offerings beyond music and podcasts, and leveraging AI and machine learning to improve user experience. As Ek stated, "Spotify is planning to implement another round of price hikes, with increases of $1 per month for individuals and $2 per month for duos and families, to be rolled out in five markets later this month and the U.S. later this year."

Key Takeaways

• Spotify reported record Q1 2024 profits of €1B, up 20% YoY.
• MAUs grew 19% to 615M, slightly below forecast, but premium subs rose 14% to 239M.
• Spotify achieved €168M operating income, a significant improvement from Q1 2023 loss.
• Spotify plans to increase prices by $1/month for individuals and $2/month for duos/families.
• Spotify aims for €250M operating profit in Q2 2024 and 631M MAUs, including 245M premium subs.