Spotify Technology saw its shares jump 13% on Tuesday following the announcement of record profits, driven by effective cost-cutting strategies and strong growth in its premium subscription segment.
The Stockholm-based company reported a 20% rise in second-quarter revenue, reaching €3.81 billion ($4.14 billion), and achieved record-high gross margins of 29.2%. Spotify swung to a profit of €274 million, or €1.33 per share, reversing a loss of €302 million in the same period the previous year. This performance exceeded analysts' expectations, who had predicted earnings of €1.23 per share on sales of €4.17 billion.
Spotify Technology, listed on the New York Stock Exchange, saw its shares rise 13% on Tuesday, continuing a trend of a 110% increase over the past year.
The increase in revenue was fueled by a 12% growth in Spotify's subscriber base, now totaling 246 million users. This growth led to a 21% increase in premium business revenue, reaching €3.4 billion, alongside a 13% rise in ad sales, amounting to €456 million.
Spotify's profitability was significantly boosted by a 16% reduction in operating costs compared to the previous year. This was achieved through reduced marketing spending and the implementation of a December plan that resulted in the layoff of 1,500 employees, about 17% of its total workforce.
"It’s an exciting time at Spotify," CEO Daniel Ek said. "We continue to innovate and demonstrate that we are not only a great product but also a thriving business. We are surpassing even our own expectations, which is very promising for our future."
Looking ahead, Spotify anticipates attracting 13 million new users in the third quarter of 2024, including 5 million new premium subscribers. This growth is expected to be driven by the expansion of its video catalog and the introduction of its Basic plan in Australia and Britain.
Spotify, founded by CEO Ek and co-founder Martin Lorentzon in 2006, projects this user growth will generate €4 billion in third-quarter revenue, leading to an operating income of €405 million.
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