Spotify’s paying users surge by 5 million in Q1 of 2023

The numbers, contained in Spotify’s investor presentation published on 25 April, marked 15% year-on-year (YoY) growth, and surpassed the streaming service’s projection for the quarter by 3 million.

“Overall, we are encouraged by the strong start to 2023,” Spotify said. “We had our strongest Q1 since going public in 2018, with nearly all our KPIs surpassing expectations.”

Spotify attributes the growth in users to “outperformance” across all regions, led by Europe and Latin America. It also cites “regional campaign outperformance and continued strength in multi-user plans.”

Spotify forecasts that it will end Q2 in June with 217 million premium subscribers, which would imply 7 million net subscriber additions in the quarter.

Spotify’s total number of monthly active users (MAUs), comprising both paying users and ad-supported users, grew by 22% YoY to 515 million at the end of Q1.

That total MAUs figure was up 26 million versus the prior quarter (Q4 2022) and 15 million above the guidance for the quarter.

Spotify says the net additions of 26 million MAUs represented its largest-ever Q1 growth, “driven by performance in both developed and developing markets, and across nearly all age demographics”.

Spotify also chalks up its MAUs growth to “continued momentum as a result of increased brand awareness, retention improvements and performance marketing efficiencies.”

The streaming giant’s guidance for Q2 is 530 million MAUs, which would imply approximately 15 million net new MAUs in the quarter.

In Q1, Spotify’s ad-supported MAUs grew by 22 million versus the prior quarter (Q4 2022) to reach 317 million in Q1, up 26% YoY (see below).

In terms of finances, Spotify generated €3.04bn ($3.4bn) in quarterly revenue in Q1, which was up 13% YoY at constant currency. However, it posted an operating loss of €156m.

That revenue growth was slightly below its expectations due to what that company says was “macro-related variability in advertising business”.

The company’s Premium/subscriber revenues stood at €2.7bn in Q1, up 13% YoY at constant currency.

Spotify’s ad-supported revenue in Q1 2023 was €329m, up 13% YoY at constant currency.

Spotify Q1 2023 results in summary:

• MAUs grew by 22% YoY to 515 million driven by strength in both developed and developing markets, and nearly all age groups.
• Premium subscribers grew 15% YoY to 210 million with outperformance across all regions, led by Europe and Latin America.
• Total revenue grew 14% YoY to €3bn, led by subscriber gains.
• Gross margin finished at 25.2%, reflecting improved music and podcast profitability.
• Operating loss finished at €156m, aided by a lower marketing spend.