Feb 6, 2024 - Business

Spotify is starting to lose less money

Illustration of a hundred dollar bill with Benjamin Franklin wearing headphones.  

Illustration: Aïda Amer/Axios

Spotify on Tuesday said it lost less money than it was anticipating in the final quarter of 2023, in its latest sunny earnings report.

Why it matters: For years, investors punished the audio giant for expensive investments in podcasting and a bloated staff that ate into its margins. Now, the company says, it's on the right track to meet their expectations.

  • Its stock is starting to crawl back toward its pandemic-era highs.
  • In the third quarter, the firm posted its first quarterly operating profit since 2021.
  • Its Q4 report showed it made more than double in operating profit compared with Q3, barring one-time restructuring charges associated with sweeping layoffs it announced in December.

Details: For the fourth quarter, the Stockholm-based streaming firm grew its monthly active user count, which includes users that access its content for free with ads, by 28 million to over 600 million.

  • The company's premium subscriber count grew by 31 million to 236 million.
  • Both monthly active users and premium subscribers came in ahead of Spotify's guidance to Wall Street by about 1 million.
Data: Spotify; Chart: Axios Visuals

By the numbers: User growth combined with investments in its ads business, helped Spotify grow its top-line revenue last quarter by 16% year-over-year to to €3.7 billion.

  • Revenue growth, combined with fewer losses, grew Spotify's adjusted operating profit to €68 million, barring €143 million in one-time charges stemming from the layoffs.
  • The company's gross profit margins last quarter came in at 26.7%, slightly ahead of expectations and up from 26.4% in the third quarter.
  • Long term, the company has said that it hopes to get its gross profit margins to land between 30%–35%.

The big picture: Spotify's strategy has shifted from paying lots of money to distribute podcasts exclusively toward owning the distribution and monetization rights to shows across its platform and others.

  • Last week, the company announced a new multiyear deal to distribute "The Joe Rogan Experience" podcast exclusively, while still allowing the show to be available on other platforms, including Apple, Amazon and YouTube.

What to watch: Spotify began integrating audiobooks into its product in the U.S. late last year. The company said it now has more than 200,000 titles available to premium subscribers in the country.

Editor's note: This story was updated with a new chart.

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