Spotify announced its first profitable quarter in more than a year in its earnings report Tuesday, stating that long-delayed subscription price hikes, a round of layoffs and marketing budget cuts assisted in boosting revenues and operating income. However, the net profit was a small one —representing just 1.9% of revenue.
The company reported third-quarter revenue rising 11% to $3.6 billion, and operating income of around $34 million. The company also added 23 million overall monthly active users, rising to 574 million year over year, with paid subscribers rising by 6 million, or 16%, to 226 million.
Total revenue rose 11% to $3.57 billion from $3.2 billion in the year-earlier quarter.
CEO Daniel Ek and chief financial officer Paul Vogel said third quarter is traditionally one of the year’s slower ones, and they expect gross margins to improve in 2024.
The company had long resisted subscription price rises and only embraced them after every major streaming service had done so; during the investor call, Vogel deflected a question claiming that the company had actually lost paid subscribers in North America by saying it was due to rounding numbers, and it had actually gained in the territory. Ek said increase prices is “adding a leg to the stool” and “part of the arsenal” the company can deploy to grow the business.
The company cited its recent $1 price hike on premium individual subscription plans as assisting the rise in revenue, as well as a resurgence in the ad market and lower operating expenses after a round of layoffs in January, which reduced full-time employees to its current 9,241 from around 9,800 at the end of 2022. The company said it expects monthly active users and premium subscribers to continue to grow for the rest of the year, predicting 27 million new users and 9 million new subscribers in the fourth quarter.
Ek and Vogel cited a move into audiobooks and a shift in podcasting strategy away from its hefty acquisitions as helping to drive growth. The company also saw a boost from from a rebound in ad-supported revenue, which was up 16% to $475 million.
