Spotify Posts Record Quarterly Profit After Year of Layoffs and Investor Scrutiny

Spotify reported record quarterly profit in the first quarter of 2024, following a year of significant layoffs and activist investor scrutiny. The audio streaming giant's total revenue increased by 20% year-over-year to €3.63 billion, while net income attributable to owners of the parent reached €197 million, or €0.97 per share, compared to a loss of €225 million in the same period last year.

The company's strong financial performance is attributed to successful cost-cutting measures and a strategic focus on profitability. Spotify slashed around 17% of its global workforce in December 2023 and reduced marketing spending, which helped boost gross margins to 27.6% from 25.2% a year earlier. Operating income reached a new high of €168 million, a significant improvement from the previous year.

Spotify's monthly active users (MAUs) grew 19% year-over-year to 615 million, though this was slightly below the company's own guidance and analysts' estimates. Premium subscriber growth was in line with expectations, rising 14% to 239 million paying users. The company's podcast business also showed promising signs, with advertising revenue growing faster than music revenue and the segment anticipated to become profitable this year.

CEO Daniel Ek acknowledged the impact of the workforce reduction but expressed confidence in Spotify's ability to reach its ambitious plans. "2023 was a truly standout year," Ek said. "We are focused on profitability and are back on track."

Why this matters: Spotify's record quarterly profit and strong revenue growth demonstrate the company's resilience and ability to navigate challenges in a highly competitive streaming market. The results also underscore the effectiveness of Spotify's cost-cutting measures and strategic focus on profitability, which have helped restore investor confidence after a turbulent year.

Looking ahead, Spotify forecasts adding 16 million monthly active users and 6 million premium subscribers in the second quarter of 2024. The company plans to introduce a new music-only subscription tier and bring on a new CFO to support its growth objectives. While challenges remain, such as lower mechanical royalty rates for songwriters and variability in MAU growth, Spotify remains committed to expanding its offerings and delivering value to creators and listeners alike.

Key Takeaways

• Spotify reported record quarterly profit in Q1 2024, up 20% YoY to €3.63B.
• Successful cost-cutting measures, including 17% workforce reduction, boosted gross margins to 27.6%.
• MAUs grew 19% YoY to 615M, slightly below guidance, while premium subscribers rose 14% to 239M.
• Podcast business showed promising growth, expected to become profitable in 2024.
• Spotify forecasts adding 16M MAUs and 6M premium subscribers in Q2 2024.