Spotify subscriber base grew by 7m to 246m in Q2, as streaming company posts ‘record high’ quarterly profit

July 23, 2024

Spotify saw its global Premium Subscriber base grow to 246 million paying users in Q2 – and posted its biggest-ever quarterly profit in the three months to end of June.

That’s according to the company’s latest financial results (for Q2 2024), filed today (July 23), in which SPOT reported that its Premium Subscriber base was up 12% YoY, and up by 7 million net subscribers on the 239 million that SPOT counted at the end of the prior quarter (Q1 2024).

SPOT’s subscriber net additions of 7 million were 1 million ahead of guidance.

“Our business continued to perform well in Q2, led by healthy subscriber gains, improved monetization and record profitability,” said Spotify in its investor presentation on Tuesday (July 23). “Although we did see another quarter of MAU variability, funnel conversion remained strong, particularly in developed markets where we recently adjusted pricing.”

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 Q2 (see below).

North America accounted for 27% of SPOT’s total subscriber base in Q1, while Latin America accounted for 22%.

Spotify reports that it saw YoY growth across all regions, with outperformance led by North America and Europe.

Monthly Active Users:

Spotify’s total number of Monthly Active Users, which combine paying users and ad-supported users, grew 14% YoY to 626 million.

That was up 11 million MAUs from the 615 million reported for the prior quarter (Q1 2024), but below guidance by 5 million (Spotify forecast that it would reach 631 million MAUs in Q2).

SPOT noted in its investor presentation that it saw growth across all regions, with its net additions compared with the prior quarter (Q1 2024) led by Rest of World and Europe.

Spotify also breaks down its Monthly Active Users by region within its investor presentation, reporting that Europe accounted for 28% of its total MAUs in Q2.

As you can see from the chart below, in Q2 2023, that figure stood at 29%, and in Q2 2022, Europe accounted for 32% of SPOT’s total MAUs.

North America, meanwhile, accounted for 18% of SPOT’s total MAU base in Q2 2024, while Latin America accounted for 22%.

In Q2 last year (2023), North America accounted for 20% of SPOT’s total MAUs, and 22% in Q2 2022.

SPOT’s ‘Rest of World’ region, meanwhile, accounted for 33% of its total MAUs in Q2 2024 versus 30% in Q2 2023. It was 24% in Q2 2022.

PREMIUM REVENUE

In terms of finances, in Q2, Spotify’s Premium / subscriber revenues grew 22% YoY at constant currency to €3.351 billion ($3.608bn), driven by the platform’s subscriber growth and a Premium ARPU increase of 10% YoY at constant currency to €4.62 ($4.97).

Spotify noted in its investor presentation that “excluding the impact of FX, ARPU performance was driven by price increase benefits, partially offset by product/market mix”.

July 2023 marked the first time in Spotify’s 15-year history that the company increased its flagship subscription price point in several territories, including the US and UK.

Last month, Spotify revealed that it’s raising the prices for its Premium subscription tiers in the United States again this year. Spotify said in a blog post on June 3 that it is updating its pricing in the market so that it “can continue to invest in and innovate on our product features”.

AD-SUPPORTED REVENUE

Spotify’s Ad-Supported Revenue in Q2 2024 was €456 million ($490.97), up 12% YoY at constant currency, reflecting double-digit Y/Y growth across all regions.

Spotify generated €3.807 billion ($4.098bn) in total quarterly revenue (including Premium and ad-supported), which was up 21% YoY at constant currency.

SPOT reported that its music advertising growth was driven “by gains in impressions sold and increased pricing and that its “Podcast advertising revenue growth was driven by growth in impressions sold across Original and Licensed podcasts and the Spotify Audience Network, partially offset by softer pricing”.

PROFITABILITY

The company’s Gross Margin finished at 29.2% in Q2, up from 24.1% in Q2 2023 (see below).

In terms of profitability, Spotify posted a “record high” operating income of €266 million (USD $286.402m ) in Q2, marking its second consecutive quarterly profit.

According to SPOT, its operating income in Q2 reflected “lower personnel and related costs and lower marketing spend”. Spotify slashed around 17% of its global workforce in December, the streaming company’s third round of job cuts last year.

At the end of Q2, Spotify’s workforce consisted of 7,372 full-time employees globally (including employees impacted by the December 2023 workforce reduction that remained on garden leave).

Spotify also reports that its operating income was impacted by €59 million ($63.52m) in Social Charges, which were €46 million higher than forecast due to share price appreciation during the quarter.

Social Charges 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 17% YoY at constant currency, from €1.013 billion in Q2 2023 to €846 million ($910.888m) in Q2 2024 (see below).

“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,” said CEO Daniel Ek.

“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.”
Daniel Ek

Added Ek: “We are doing so on a timeline that has exceeded even our own expectations. This all bodes very well for the future.”

In terms of guidance for Q3, Spotify forecasts reaching 639 million MAUs, an addition of around 13 million net new MAUs in the quarter.

The company projects its total Premium Subscriber base to hit 251 million in Q3, an addition of approximately 5 million net new subscribers in the quarter.

Spotify forecasts an operating income of €405 million for Q3, and total revenue of €4 billion.