Spotify records robust profit growth as user base grows; founder Daniel Ek moves to new role — details here

Spotify forecast first-quarter earnings above Wall Street estimates on Tuesday, according to the news agency; The Swedish streaming company continued to benefit from strong user growth and recent subscription price increases, with its shares rising sharply in early trading. Reuters reported.

The results mark the first report since joint CEOs Gustav Soderstrom and Alex Norstrom took charge of founder Daniel Ek, who stepped into the role of executive chairman in January as part of a leadership shakeup.

The new outlook sent the company’s shares rising nearly 16% to $479.22 on Tuesday, February 10.

Spotify’s revenue growth grew at its slowest pace since its 2018 market listing, although price increases and cost cuts in various markets boosted profits in the December quarter, according to the agency report.

What is driving this growth?

At the core of its growth strategy, Spotify has launched an instant playlist feature to fend off competition from Apple and Amazon’s streaming services, invested in video podcasts through a partnership with Netflix, and expanded beyond audiobooks into physical books.

Interactive DJ, Spotify’s AI-powered personalized music tool, has “more than 98 million paid subscribers using it and generating 4 billion hours of engagement,” Soderstrom said. Reuters.

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“Spammy AI music is not a new problem. It’s just a larger dimension of an existing problem,” he said in a call with analysts.

Spotify also works closely with the music industry to ensure creators and labels include user-visible information in metadata about how their music was made, the report said.

Company estimate

The company is forecasting operating income of 660 million euros ($786.13 million) in the first quarter, compared with analysts’ average estimate of 652.3 million euros, according to data compiled by LSEG.

Meanwhile, Spotify’s quarterly revenue estimate of 4.5 billion euros was slightly below the estimate of 4.57 billion euros. Fourth-quarter revenue rose 7% to 4.53 billion euros, in line with forecasts.

Spotify also increased the price of its monthly premium subscription plan by $1 to $12.99 in the US, Estonia and Latvia this year, following similar price increases in more than 150 markets last year.

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Commenting on the company’s growth, Norstrom said, “We (Spotify) are seeing a lot more growth coming from emerging markets.”

While the quarterly outlook for 759 million monthly active users was above the forecast of 753 million, the forecast for the number of premium subscribers to increase by 3 million to 293 million was below forecasts.

The number of premium subscribers increased by 10% to 290 million in the fourth quarter, compared to the forecast of 290.9 million.

The company added a record MAU net of 38 million, bringing the total to 751 million, and attributed the growth to Wrapped, its year-end summary of users’ listening habits.