Spotify Q3 total revenue up 19% to $4.2bn

The report showed that the company’s total revenue was up 19% year-on-year (YoY) to €4bn ($4.2bn), while its monthly active users (MAUs grew 11% YoY to 640 million.

Subscribers increased 12% YoY to 252 million as gross margin reached 31.1%. The operating income improved to €454m.

“We’ve never been in a stronger position, thanks to the outstanding execution by our team,” Spotify CEO Daniel Ek said. “I’m incredibly proud of the way we’ve delivered and the progress we’ve made.  We’re where we set out to be — if not a little further — and on a steady path toward achieving our long-term goals. This relentless pursuit of innovation and commitment to growth sets us up to deliver the most valuable user experience in the industry, while reinforcing the core strengths that make Spotify unique. I am very excited about what lies ahead for us.”

“The business delivered strong Q3 results, as all of our KPIs met or exceeded guidance and profitability reached record levels. MAU net additions ticked up to 14 million, surpassing guidance by 1 million. Subscriber net additions of 6 million were also ahead by 1 million.

Despite greater than anticipated headwinds from unfavourable currency movements, revenue was in-line and grew 21% YoY on a constant currency basis. Gross margin of 31.1% was ahead of guidance and up 473 bps YoY, while operating income of €454m was better due to gross margin strength and lower personnel related and marketing costs.

Operating income was affected by €54m in social charges, which were €39m above forecast due to share price appreciation during the quarter. Q3 free cash flow reached €711m, bringing year-to-date free cash flow generation to €1.4bn.

“Overall, we are very pleased with our performance heading into year-end and view the business as well positioned to sustainably grow towards the long-term goals outlined at our 2022 Investor Day,” Ek added.

Below are the highlights of the report:

Double digit YoY growth in MAUs and subscribers

• MAUs grew 11% YoY to 640 million, reflecting YoY and quarter to quarter (QoQ) growth across all regions.
• Premium Subscribers grew 12% YOY to 252 million, reflecting YoY and QoQ growth across all regions strong revenue growth with record high profitability.
• Total revenue grew 19% YoY to €4bn; on a constant currency basis, Total Revenue grew 21% YoY.
• On a constant currency basis, Premium ARPU grew 11% YoY (146 bps of acceleration vs Q2 24).
• Gross margin finished at a record high of 31.1% (up 473 bps YoY).
• Operating income finished at a record high of €454m (an 11.4% margin), solidly positioning the company to deliver its first full year of Operating Income profitability.

Expanded user experiences and engagement globally

• Launched AI DJ to Spanish speaking music fans in 18 markets.
• Expanded AI Playlist in Beta to the United States, Canada, Ireland and New Zealand (six markets in total).
• Rolled-out comments for podcasts, bringing interactivity to the industry.
• In October, expanded music video availability to 85 additional markets (97 markets in total); incorporated over 200,000 audiobook titles into our Premium offering in France, Belgium, the Netherlands and Luxembourg (10 markets in total).

Financial summary

Revenue

Revenue of €3,988 million grew 19% YoY in Q3 (or 21% YOY constant currency), reflecting:

• Premium Revenue growth of 21% Yo (or 24% YOY constant currency), driven by subscriber gains and ARPU increases; and
• Ad-Supported Revenue growth of 6% YoY (or 7% YoY constant currency).
• Unfavourable currency movements affected Total Revenue YoY growth by ~270 bps vs guidance for ~100 bps.

Profitability

Gross margin was 31.1% in Q3, up 473 bps YOY reflecting:

• Premium gains driven by music and audiobooks; and
• Ad-supported gains driven by music and podcasts.
• Other costs of revenue favourability benefited both the premium and ad-supported segments.

Operating Income was €454m in Q3 and reflected:

• Lower personnel and related costs and lower marketing spend, partially offset by €54 million in social charges.
• At the end of Q3, Spotify workforce consisted of 7 242 full-time employees globally.

Free cash flow and liquidity

Free cash flow was €711m in Q3. Our liquidity and balance sheet remained strong, with €6.1bn in cash and cash equivalents, restricted cash and short term investments.