Spotify's Profit Forecasts Surge on Subscriber Growth and Price Increases

Spotify Technology (SPOT) has forecasted a profit above estimates for the fourth quarter, driven by robust subscriber growth and strategic price increases. The streaming-audio giant reported a 12% year-over-year increase in premium subscribers, reaching 246 million, and a 15% rise in ad-supported monthly active users (MAUs) to 393 million in the second quarter of 2024. This growth, coupled with price hikes in key markets, has bolstered Spotify's revenue and profitability.

Spotify's revenue grew by 20% year-over-year to €3.807 billion in the second quarter, with premium revenue up 21% to €3.351 billion and ad-supported revenue increasing 13% to €456 million. The company's gross margin reached a record high of 29.2%, up 510 basis points from the previous year, driven primarily by music content cost favourability.



Spotify's price increases, the first in the US since its launch over a decade ago, have not significantly impacted subscriber retention or churn rates. The company's market capitalization has grown to $109.3 billion, surpassing the combined market capitalization of all standalone, publicly traded music companies. This suggests that Spotify's price increases have not driven users to competing services.

Spotify's podcast and audiobook offerings have also contributed to its overall revenue and user engagement. The company has invested heavily in podcasts, acquiring popular shows and creating original content, with podcast listening hours growing by 150% year-over-year in the second quarter of 2023. Spotify's audiobook offering, launched in 2021, has further enhanced the value proposition of its subscription service, allowing Premium subscribers to listen to up to 15 hours of audiobook content per month.

As Spotify continues to expand its user base and explore new revenue streams, investors remain optimistic about the company's long-term prospects. With a strong focus on user engagement, content acquisition, and strategic pricing, Spotify is well-positioned to maintain its market leadership in the competitive streaming landscape.