Spotify announced a record quarterly profit and exceeded expectations for both top and bottom lines, following a year of cost-cutting and streamlining.
Here’s how the company performed relative to analyst expectations:
Earnings per share: 97 cents, compared to 65 cents predicted by LSEG analysts.
Revenue: $3.64 billion, compared to $3.61 billion projected by LSEG analysts.
Monthly active users (MAUs): 615 million, compared to 618 million reported by StreetAccount.
Spotify shares increased by more than 10% in response to the announcement. In addition, the company exceeded its quarterly gross margin guidance.
Last year, the streaming behemoth slashed costs by laying off more than a quarter of its workforce, according to industry tracker Layoffs.fyi. Spotify inked a high-profile deal with controversial podcaster Joe Rogan earlier this year, but has since dramatically reduced its podcast ambitions.
Spotify also provided guidance for the future quarter. The business forecasts 16 million net new MAUs, bringing the total to 631 million monthly active users. It also forecasted a 28.1% increase in gross margin due to expense savings across the board.
“Overall, we are encouraged by the strong start to the year and believe the business is well positioned to deliver on the goals outlined at our 2022 Investor Day,” the company told shareholders in a presentation.
Many of the improvements the corporation implemented in the recent year occurred when Mason Morfit’s ValueAct declared an interest in the company in February 2023 and publicly pressed for spending reductions. Spotify fired off 17% of its employees before the end of the year.
Spotify’s business also expanded, with MAUs increasing 19% year over year and 2% from the previous quarter. Nonetheless, the firm missed its MAU target by 3 million users. Spotify attributed the slowing growth to “moderated marketing activity” caused by cost-cutting, which resulted in “more normalized growth.”
ValueAct, which oversees roughly $12 billion in assets, owns a 0.5% interest in Spotify valued at $280 million. When the activist investor first revealed the position in 2023, it held approximately 1.2% of Spotify. FactSet believes that the initial investment has more than doubled.
