The Spotify app. Photographer: Tiffany Hagler-Geard/Bloomberg Paid subscribers increased 12% from a year earlier to 246 million, also beating the average analyst estimate compiled by Bloomberg. Monthly active users jumped 14% to 626 million.
“It’s an exciting time at Spotify. We keep on innovating and showing that we aren’t just a great product, but increasingly also a great business,” Chief Executive Officer Daniel Ek said in a statement. “We are doing so on a timeline that has exceeded even our own expectations.”
Ek pointed to updates that helped the platform become “stickier,” including splashy features that hinge on fan interaction with creators, as well as automation. The CEO highlighted countdown pages, which enable users to bookmark upcoming audiobook releases, and the rollout of Daylist, an algorithm-driven, constantly changing personalized playlist.
Stockholm-based Spotify has significantly pared costs over the last year to boost profitability, reducing its workforce and pulling back on podcast production. It also shook up its approach to content and pricing, rolling out price hikes, planning new subscription tiers and introducing audiobooks at the end of 2023.
Shares rose as much as 16% to $343.40 in New York on Tuesday, the highest since February 2021.
The bump in Spotify’s subscriber base helped fuel a 20% increase in sales in the second quarter to €3.81 billion. The company forecast 639 million active users for the current quarter, lower than analysts’ expectations of 650.45 million. Paid subscribers are projected to increase by 5 million to 251 million, in line with estimates. The company is projecting operating income of €405 million.
“Long-term profitability hinges on its ability to leverage podcasts, audio books and new royalty deals with music labels,” said Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near, in a note on Tuesday. “Spotify’s strategy to own podcast content may be a key growth driver, especially in efforts to boost margin to 30%-35%, as pressure from hefty investments eases. Still, competition from Amazon.com and Apple is stiff.”