Spotify Shares Surge After Strong Earnings Report

Spotify released its 4th quarter earnings on Tuesday, showing that it beat projections in revenue and user growth.

Spotify announced its fourth-quarter earnings on Tuesday, showing that it exceeded analysts’ expectations behind a surge of user growth. The music streaming giant jumped 9% early Tuesday morning, with FinTech company Refinitiv indicating that Spotify brought in a revenue of 3.17 billion euros vs. the 3.16 billion expected. Their loss per share beat out the estimated loss (1.27 euros) by 0.13 (1.40).

Here’s a quick overview of the Q4 Spotify Earnings:

489 million monthly active users for the quarter, up 20% year-over-year.
There were a record-high 33 million net additions to monthly active users during the quarter
The company reported 205 million paid subscribers, up 14% from a year ago.

In its Q3 report, Spotify revealed that it expected to add 23 million new monthly active users with a revenue increase to 3.2 billion euros. Their investment in advertising is paying off as seen by its ad-supported revenue, which increased by 14% year-over-year, accounting for 14% of the total revenue.

“We always knew that 2022 would be an investment year and 2023 will be a year where we would slow down the investments and thereby operating expenditure while revenue keeps on climbing,” Chief Financial Officer Paul Vogel said.

Subscribers Jumped, But Podcast Investment created losses.

Interestingly enough, the company said that the bulk of its subscriber growth was through its podcasting platform, with featured names such as the Obama’s, Joe Rogan, Meghan Markle and Prince Harry, Kim Kardashian, Dax Shepard & Monica Padman, and Alexandra Cooper. The company’s invested more than $350 million over the next three years to those specific podcast hosts.

This comes a week after the company laid off 6% of its workforce and CEO Daniel Ek admitted in a note to employees that he was “too ambitious in investing ahead of our revenue growth.”

Spotify spent more than $1 billion over the past four years. Entering 2023, Spotify expects to gross between 30% to 35% over the long term, amid plans to further scale its podcasting and ads businesses, though stock trades were $80 per share in late December — down roughly 70% from 2022.

“Q1 is always the smallest quarter with respect to user growth. We don’t have the same level of marketing campaign, as we do in Q2 to Q4,” Ek said. “Spotify will double down on things that worked well and stop doing the things that don’t work. We are a lot more focused on efficiency.”