Streaming Giant Spotify Posts Record Profits, Sending Its Stock Soaring

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.

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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.

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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.

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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.

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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.

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"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."

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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.

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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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