In the first quarter of 2024, Spotify witnessed a slower-than-anticipated influx of new users, yet the audio-streaming platform celebrated unprecedented profitability.
Despite a 19% year-over-year increase in total monthly active users (MAUs) to 615 million, gaining 13 million users from the previous quarter, the company fell short of its projection by 3 million. Spotify attributed this to “moderated marketing activity,” which normalized growth after a stellar 2023 performance.
The lower-than-expected MAU growth coincided with organizational changes, notably December 2023 layoffs that saw 17% of the workforce cut. Daniel Ek, CEO of Spotify, acknowledged that these layoffs disrupted operations more than anticipated.
However, Spotify Premium subscribers grew by 14% year over year to 239 million globally, aligning with projections.
In terms of revenue, the quarter saw a 19.5% increase to €3.64 billion, surpassing expectations. Gross margin exceeded guidance, reaching 27.6%, with gross profit hitting €1.0 billion for the first time. Operating income reached a quarterly high of €168 million, while net income for the quarter stood at €197 million, a significant improvement from the net loss of €225 million in the same period last year.
Daniel Ek expressed confidence in Spotify’s monetization strategy, emphasizing a focus on revenue growth and margin expansion. Looking ahead to the second quarter of 2024, Spotify anticipates revenue of approximately €3.8 billion, with projections of adding 16 million total MAUs and 6 million Premium subscribers.
Average revenue per subscriber in Q1 increased by 5% year over year to €4.55, driven by price increases offset by changes in product and market mix.
Spotify’s ad-supported revenue grew by 18%, with podcast ad revenue outpacing music. The Spotify Audience Network witnessed high single-digit growth quarter over quarter among participating publishers and shows.
The company remains committed to its podcast business, aiming for profitability in 2024. Last month, Spotify released its “Loud & Clear” report, revealing a record payment of over $9 billion to the music industry in 2023.
Spotify expects to pay out even more in 2024 to songwriters and music publishers. However, it recently announced lower music-licensing rates in the U.S., following the introduction of an audiobook-only tier and a music-and-audiobook bundle.
Looking forward, Spotify appointed Christian Luiga as its next CFO, with Ek highlighting Luiga’s experience at Telia during its investment in Spotify.
