Spotify records $179m profit in Q1 2024

In a report released on 23 April, the company’s gross profit surpassed €1bn in a quarter for the first time in its history. Similarly, total revenue increased by 21% on a constant currency basis to €3.6bn in what Spotify termed a “solid start to the year as monetisation and efficiency take centre stage.”

“We’ve talked about 2024 as the year of monetisation and we’re delivering on that ambition,” Spotify founder and CEO Daniel Ek said. “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 at 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.”

The company also reported “greater monthly active users (MAUs) variability during the quarter amid moderated marketing activity and organisational change.” Spotify had forecast an extra 16 million MAUs but ended the quarter with an additional 13 million, up 19% year-on-year (YoY) and 2% on the prior quarter. MAUs were up by 26 million in Q1 of 2023 and 28 million in Q4 of 2023.

Spotify says it is forecasting an additional 16 million monthly users and an extra 6 million subscribers during Q2 of 2024.

The streamer registered Premium subscriber growth of 14% YoY to 239 million, an additional 3 million subscriptions in line with the forecast. Premium average revenue per user (ARPU) grew 7% YoY.

Commenting on the earnings call, Ek said: “We missed our target due to a bit of a slowdown at the start of the year. So I want to directly address the three main factors contributing to this outcome and how we’re adjusting over the next few quarters. First, the MAU and subscription growth we achieved in 2023 not only surpassed our most ambitious forecast but also set a record for the most significant user growth in Spotify’s history. While we anticipate continuous robust growth going forward, 2023 was a truly standout year and should not be based on expectation for every subsequent year.

“Another significant challenge was the impact of our December workforce reduction. Although there’s no question that it was the right strategic decision, it did disrupt our day-to-day operations more than we anticipated. It took us some time to find our footing, but more than four months into this transition, I think we’re back on track. I expect to continue improving on our execution throughout the year, getting us to an even better place than we’ve ever been.

“The third issue is related to marketing spend. In hindsight, we probably pulled back too significantly throughout 2023 and, as such, we’re already correcting this as we move into Q2. To be clear, we’re not going to go back to what we were doing before, we still continue to expect improving profitability over the course of this year and into the next. And new funds are being directed towards acquiring and reactivating high-value users to enhance our base with their deeper engagement and loyalty.”

Spotify expanded its audiobook offering during Q1 and launched videos in 11 markets. It also expanded its strategic partnership with Universal Music Group.

“Short form music content is a big focus of ours,” Ek said. “You’re going to see more video on the music side making its way into the product in 2024. And two other things that you’re going to see are, of course, more AI products in the music side as well. And in addition to that, I believe you’re going to see an even more global music ecosystem than any time before in history. So we’re excited about all these sort of three core trends in music.”