Spotify Sees Record Profit in Q2 Following Subscription Price Hike and Layoffs
Spotify reported record profit in the fiscal second quarter Tuesday, beating Wall Street expectations, a result of a slimmed down work force and hiking subscription prices, as well as expanded digital offerings.
Here are the top-line results:
Revenue: €3.81 billion, up 20% year-over-year
Net Profit: €274 million, compared to a net loss of €302 million in 2023
Subscribers: Grew 12% year-over-year to 246 million subscribers
Monthly Active Users: Grew 14% year-over-year to 626 million
Spotify’s operating costs declined 16% in the second quarter due mostly to “a decrease in personnel and related costs and lower marketing spend.” Gross margin for the period was 29.2% compared to 24.1% in the year prior.
In June, Spotify announced it was hiking premium plan rates in the U.S. for the second time in one year. The Premium individual plan increased by $1, from $10.99 to $11.99 per month, a 20% hike over the last two years. The Premium Family plan, which allows at least six members, increased by $3, from $16.99 to $19.99 per month.
The audio streaming giant slashed around 17% of its workforce in December, laying off about 1,500 staffers. They followed with a January reduction of 600 workers from its podcast division and another 200 job cuts in June 2023.
The company’s ad-supported revenue grew 13% in the quarter with double-digit growth in all divisions. Music advertising growth was attributed to impressions sold and increased pricing. Podcast ad revenue growth was driven by impressions across both original and licensed offerings.
At the close of the second quarter, Spotify had 626 million total monthly active users, a gain of 11 million, short of a 16 million projection. The company reported 246 million premium subscribers, adding 7 million in the quarter, topping expectations of 6 million.
“It’s an exciting time at Spotify. We keep on innovating and showing that we aren’t just a great product, but increasingly also a great business,” Spotify founder and CEO Daniel Ek said in a statement. “We are doing so on a timeline that has exceeded even our own expectations. This all bodes very well for the future.”
The audio streamer has committed to growing experiences for subscribers including music discovery offerings, with some powered by AI technology. Spotify has also grown its video podcast offerings, with over 250,000 video podcast shows on the platform.
Spotify also introduced Creative Lab, the company’s new in-house creative agency that will leverage the streamer’s creative power to help partners build their brand on the platform.
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