Spotify’s financial results for the first quarter of 2024

Spotify reported first quarter earnings on Tuesday, exceeding expectations and reporting record quarterly profit. The company’s performance included a strong financial showing, surpassing analyst predictions.

The earnings per share stood at 97 cents, outperforming the 65 cents that LSEG analysts had anticipated. Meanwhile, Spotify’s revenue reached $3.64 billion, beating the expected $3.61 billion projected by LSEG analysts. In terms of monthly active users (MAUs), Spotify reported 615 million, slightly below the 618 million estimated by StreetAccount.

In response to the positive financial results, Spotify shares surged by more than 10%. Additionally, the company surpassed its quarterly gross margin guidance. This success follows a period of significant cost-cutting and restructuring at Spotify.

Throughout the last year, Spotify implemented various cost-cutting measures, including substantial layoffs amounting to more than a quarter of its workforce. Although the company secured a prominent deal with podcaster Joe Rogan earlier this year, Spotify scaled back its podcast ambitions to focus on core operations.

Looking ahead, Spotify provided guidance for the upcoming quarter, anticipating a net increase of 16 million MAUs, bringing the total to 631 million monthly active users. The company also projected an improved gross margin of 28.1%, driven by comprehensive cost-saving initiatives across the business.

ValueAct, an investment firm with significant holdings, notably influenced Spotify’s strategic decisions. In response to ValueAct’s calls for spending rationalization in 2023, Spotify underwent further restructuring, culminating in a significant reduction in staff numbers by the end of the year.

Despite demonstrating growth in its core business, Spotify experienced slightly slower MAU growth than expected, attributing this to reduced marketing activities following cost-cutting measures. The company acknowledged the impact of these changes on its user acquisition rate, which led to “more normalized growth.”

ValueAct, managing assets worth nearly $12 billion, holds a 0.5% stake in Spotify valued at $280 million. The firm’s initial investment in Spotify has more than doubled in value, according to FactSet estimates, showcasing the positive impact of its strategic involvement.

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