Spotify Shares closed 10% higher on Tuesday after the company reported a surprise third-quarter profit – its first quarterly profit in a year and a half – as price increases and cost-cutting measures took hold.
The company’s shares have more than doubled so far this year, giving it a market value of $33.22 billion.
The Swedish music streaming giant posted a profit of 65 million euros ($68.9 million), due to “lower marketing expenses and lower personnel and related costs.” Earlier this year, Spotify laid off 200 employees, or 2% of its workforce, as part of a strategic shift in its podcasting division.
Here you can find out how the company has developed in the three months up to September 30th compared to what Wall Street expected:
- Earnings per share: 33 euro cents versus an expected loss of 22 euro cents, according to LSEG, formerly known as Refinitiv
- Revenue: 3.36 billion euros compared to 3.33 billion euros expected, according to LSEG
- Premium Subscribers: 226 million versus 224 million, according to StreetAccount
Spotify increased the prices of its subscription plans earlier this year, increasing the monthly bill for users by between $1 and $2 depending on the plan. In its third-quarter earnings report, Spotify said “the early impact of price increases” was partially responsible for its 11% year-over-year revenue growth.
“We have raised prices in the past and typically see very little impact on churn,” CFO Paul Vogel said on CNBC’s “Squawk on the Street” Tuesday. “We had a similar forecast for this quarter. We basically saw no real change on the churn side and we saw an acceleration in “gross additions” of subscribers.
The company had 574 million monthly active users in the quarter, compared to an estimated 572.1 million, according to StreetAccount. Monthly active users drove ad-supported revenue of 447 million euros, the company reported, up 16% year over year.
Spotify stock chart.
Spotify announced earlier this month that it would offer subscribers access to more than 150,000 Audiobooks. The service has already launched in the UK and Australia and will launch in the US later this year.
It’s Spotify’s latest foray into another audio format outside of music, after expanding into podcasts in 2015.
“The podcasting business is a much larger global business because Spotify is now part of that business,” Vogel said during the company’s earnings call Tuesday. “We believe we will have the same advantage on the audiobook side, which will be great for authors and consumers.”
LightShed analyst Rich Greenfield said in a post On
Spotify expects profitability to continue in the fourth quarter and 2024.
“This is a turning point for us,” said Vogel. “We expect that we are now in a position to continue to deliver quarterly profits.”