Spotify saw its global Premium Subscriber base grow to 239 million paying users in Q1 – and achieved its biggest-ever quarterly profit in the three months to end of March.
That’s according to the company’s latest financial results (for Q1 2024), filed today (April 23), in which SPOT reported that its Premium Subscriber base was up 14% YoY, and up by 3 million net subscribers on the 236 million that SPOT counted at the end of the prior quarter (Q4 2023).
Spotify reported that its Premium Subscriber growth was led by “continued double-digit YoY growth across all regions” as well as growth in its Family and Duo plans.
Spotify breaks down its Premium Subscriber base by region within its investor presentation, reporting that Europe accounted for 38% of its total premium subscriber base in Q1 (see below).
North America accounted for 27% of SPOT’s total subscriber base in Q1, while Latin America accounted for 22%.
Spotify noted in its investor presentation that its “business performed well in Q1, led by healthy subscriber gains, improved monetization and record strength in profitability”.
“We’ve talked about 2024 as the year of monetization and we’re delivering on that ambition.”
Daniel Ek, Spotify
The company added: “Although we saw greater MAU variability during the quarter amidst moderated marketing activity and organizational change, Subscriber net additions of 3 million were in-line with guidance while YoY growth in Premium ARPU and advertising revenue both improved.”
Monthly Active Users:
Spotify’s total number of Monthly Active Users, which combine paying users and ad-supported users, grew 19% YoY to 615 million.
That was up 13 million MAUs from the 602 million reported for the prior quarter (Q4 2023), but below guidance by 3 million (Spotify forecast that it would reach 618 million MAUs in Q1).
The company reported that its MAU performance in Q1 reflected “healthy growth across all regions”, led by Latin America and Rest of World, as well as “Moderated marketing activity, which led to more normalized growth following 2023’s record performance”.
PREMIUM REVENUE
In terms of finances, in Q1, Spotify’s Premium / subscriber revenues grew 21% YoY at constant currency to €3.247 billion ($3.525bn) and was driven, according to SPOT, by its subscriber growth and a Premium ARPU increase to €4.55 ($4.94) – up 7% YoY constant currency.
Spotify noted in its investor presentation that “excluding the impact of FX, ARPU performance was driven by price increase benefits, partially offset by product and market mix”.
July 2023 marked the first time in its 15-year history that Spotify increased its flagship subscription price point in several territories including the US and UK. Spotify also plans to raise its subscription prices again this year in multiple markets, including the US.
AD-SUPPORTED REVENUE
Spotify’s Ad-Supported Revenue in Q1 2024 was €389 million ($422.37), up 19% YoY constant currency, reflecting double-digit Y/Y growth across all regions.
SPOT reported that its “music advertising revenue grew healthy double-digits YoY driven by growth in impressions sold and increased pricing”.
The company’s podcast advertising revenue grew faster than music, however, driven by what SPOT said was “significant growth in impressions sold across Original and Licensed podcasts and the Spotify Audience Network, partially offset by softer pricing”.
Spotify generated €3.636 billion ($3.947bn) in total quarterly revenue (including Premium and ad-supported), which was up 21% YoY at constant currency.
PROFITABILITY
The company’s Gross Margin finished at 27.6% in Q1 2024, up from 25.2% in Q1 2023.
In terms of profitability, Spotify posted an operating income of €168 million ($182.41m), which it noted in its investor presentation was “a new quarterly high” and reflected “lower personnel and related costs and marketing spend”.
Spotify slashed around 17% of its global workforce in December, the streaming company’s third round of job cuts last year.
According to its latest investor filing, at the end of Q1, Spotify’s workforce consisted of 7,721 full-time employees globally, which it noted on Tuesday (April 23), “includes employees impacted by December 2023 workforce reduction that remained on garden leave”.
SPOT also reported that its operating Income was impacted by €82 million ($89.03m) in Social Charges, which are payroll taxes associated with employee salaries and benefits in some of the countries in which the company operates.
Spotify’s operating expenses saw a decline of 9% YoY at constant currency, from €922 million in Q1 2023 to €836 million ($907.72m) in Q1 2024 (see below).
Spotify also reported that its Gross Profit, which stood at €1.004 billion ($1.090bn) in Q1, surpassed €1 billion for the first time in its history.
In terms of guidance for Q2, Spotify forecasts reaching 631 million MAUs, an addition of around 16 million net new MAUs in the quarter.
The company projects its total Premium Subscriber base to hit 245 million in Q2, an addition of approximately 6 million net new subscribers in the quarter.
Spotify forecasts an operating income of €250 million for Q2, and total revenue of €3.8 billion.
“We’ve talked about 2024 as the year of monetization and we’re delivering on that ambition,” said Spotify co-founder and CEO Daniel Ek.
“Now as we’ve shifted to focus on strong revenue growth and margin expansion, we see a clear opportunity to ensure we are also continuing to grow the top of our funnel.
“I feel good about the changes we are implementing and remain very confident in our ability to reach the ambitious plans we’ve outlined.”
All EUR-USD conversions made at the average rate of the relevant period according to the European Central BankMusic Business Worldwide
