Daniel Ek, CEO of Swedish music streaming service Spotify, gestures while speaking at a press conference in Tokyo on September 29, 2016.
Toru Yamanaka | AFP | Getty Images
Spotify report first quarter earnings After a year of deep cost cutting and streamlining, the company hit a record quarterly profit on Tuesday, beating both revenue and profit estimates.
Here’s how the company performed compared to analysts’ expectations:
- Earnings per share: 97 cents vs. 65 cents expected by LSEG analysts
- income: US$3.64 billion, compared with US$3.61 billion expected by LSEG analysts
- Monthly Active Users (MAU): 615 million vs. StreetAccount’s estimate of 618 million
Affected by this news, Spotify’s stock price rose more than 10%. The company’s quarterly gross margin also beat expectations.
The streaming giant went into cost-cutting mode last year, cutting more than a quarter of its staff, according to industry tracker Layoffs.fyi. Earlier this year, Spotify terminated a major deal with controversial podcaster Joe Rogan but otherwise significantly scaled back its podcasting ambitions.
Spotify also released guidance for the upcoming season. The company expects net new monthly active users to be 16 million, bringing the total number of monthly active users to 631 million. Gross profit margin also improved by 28.1%, driven by cost improvements across the business.
“Overall, we are encouraged by the strong start to the year and believe the business is well-positioned to deliver on the targets outlined at the 2022 Investor Day,” the company told shareholders in a presentation.
Many of the changes made by the company over the past 12 months come after Mason Morfit’s ValueAct disclosed a stake in the company in February 2023 and made public calls to rationalize spending. Spotify laid off 17% of its employees by the end of the year.
Spotify’s business itself has also grown, with the number of monthly active users growing 19% year-on-year and 2% quarter-on-quarter. Still, the company fell short of its goal of 3 million users. Spotify attributed the slowdown to “slower marketing activity” – driven by cost cuts – leading to “more normalization of growth.”
ValueAct manages nearly $12 billion in assets and owns 0.5% of Spotify, worth $280 million. When the activist investor first disclosed the position in 2023, it held about 1.2% of Spotify. The value of its initial investment has more than doubled, according to FactSet estimates.
About The Author
