Spotify exceeded analyst expectations in the third quarter with 713 million monthly active users and net income of €899 million as the company expands into AI-powered music tools and video content ahead of a leadership transition at year-end.
The world’s largest music streaming service reported 11 per cent year-over-year growth in monthly active users, surpassing the company’s prior guidance of 710 million. In comparison, premium subscribers increased by 12 per cent to 281 million, reports Bloomberg. Revenue increased 7 per cent to €4.27 billion ($4.9 billion), also beating analyst expectations of €4.23 billion.
The Stockholm-based company posted net income equivalent to $1.03 billion, or €3.28 a share, up from €300 million or €1.45 per share a year earlier, reports the Wall Street Journal. Analysts were expecting a profit of roughly €1.96 a share for the third quarter.
Subscriber gains came from all over the world following price hikes in August that raised subscription costs by around 9 per cent in multiple markets across South Asia, the Middle East, Africa, Europe, Latin America and the Asia-Pacific region. Price increases have become routine at the company, with investors and music owners encouraging higher charges as markets like the US have widely adopted streaming.
New co-CEOS to take over
Co-founder and Chief Executive Officer Daniel Ek announced in September that he will step down at the end of the year, transitioning to executive chairman. Co-presidents Gustav Söderström and Alex Norström will take over as co-CEOs.
The company launched 30 product updates this autumn, including “lossless” audio and playlist mixing, in which users can add transitions and match tempos between songs. Spotify also introduced messaging among users and more music-discovery controls. In October, the company launched in ChatGPT, letting users get music and podcast recommendations from the artificial intelligence chatbot.
As theFreesheet previously reported, Spotify has announced partnerships with Sony Music Group, Universal Music Group, Warner Music Group, Merlin and Believe to develop AI music products focused on empowering artists and songwriters whilst protecting their rights and creative choices. The streaming platform plans to build a generative AI research lab and product team to develop technologies creating new experiences for fans and artists.
“Technology should always serve artists, not the other way around,” said Norström, co-president and chief business officer at Spotify. “Our focus at Spotify is making sure innovation supports artists by protecting their rights, respecting their creative choices, and creating new ways for fans to discover and enjoy the music they love.”
The company is increasing its investment in video, including through a new deal with Netflix that will bring certain Spotify video podcasts to the streaming service. Although Spotify initiated an era of podcast licensing deals and acquisitions, it has since become the second-most-popular podcast service in the US, behind YouTube, according to Edison Research.
Ad-supported revenue declined 6 per cent year over year due to pricing pressure. Spotify’s share price was up about 40 per cent this year as of Monday’s close.
For the current quarter, the company forecasts that monthly active users will grow to 745 million, adding approximately 32 million, while premium subscribers will increase to 289 million, adding roughly eight million. It forecast revenue of €4.5 billion for the current quarter and a gross margin of 32.9 per cent.
