Spotify announced its first profitable quarter in more than a year in its earnings report on Tuesday, saying that long-delayed subscription price hikes, a round of layoffs and marketing budget cuts helped boost revenue and operating income. However, the profit was small – just 1%.
The company reported an 11% increase in revenue to $3.6 billion in the third quarter, with operating income of around $34 million. The company also added 23 million monthly active users to 574 million year-on-year, with the number of paid subscribers rising by 6 million, or 16%.
Total revenues rose 11% to $3.57 billion from $3.2 billion.
CEO Daniel Ek and CFO Paul Vogel said the third quarter is traditionally one of the slower quarters of the year, and they expect gross margins to improve in 2024.
The company had long resisted raising subscription prices, only agreeing to do so after every major streaming service had done so; during the investor call, Vogel deflected a question about whether the company had actually lost paying subscribers in North America by saying it was due to rounding and that it had actually gained in the area. Ek said that raising prices is “adding a leg to the stool” and “part of the arsenal” the company can use to grow the business.
The company cited its recent $1 price increase on premium individual subscription plans as supporting the revenue increase, as well as a resurgence in the advertising market and lower operating expenses following a round of layoffs in January that reduced full-time employees from about 9,800 at the end of 2022 to 9,241 today. The company said it expects monthly active users and premium subscribers to continue to grow for the rest of the year, forecasting 27 million new users and 9 million new subscribers in the fourth quarter.
Ek and Vogel cited a move into audiobooks and a shift in podcasting strategy away from its hefty acquisitions as helping to drive growth. The company was also boosted by a rebound in ad-supported revenue, up 16% to $475 million.
