The music streaming giant Spotify has announced record profits of more than €1 billion following a year of cost-cutting measures and staff layoffs.
Despite missing its forecast for monthly active users, the Swedish company has been steadily expanding its user base by offering subscribers access to podcasts and audiobooks.
Last year, Spotify underwent a workforce reduction of 17% in a bid to rein in costs, with CEO Daniel Ek citing the move as part of actions to align expenditures with objectives.
While focused on worldwide expansion and aiming to reach a billion users by 2030, Spotify has recommitted to its mission, allocating funds to attract new audiences.
Quarterly revenue surged by 20% to €3.64 billion, and these profits were largely fueled by its flourishing podcast business, with gross margins climbing to 27.6% in the quarter. This growth was propelled by substantial investments, including the acquisition of popular shows such as “The Joe Rogan Experience,” with over a billion euros dedicated to building up the podcast arm.
While slightly below its forecast, Spotify has 615 million users, with premium subscribers increasing by 14% in the first quarter to reach 239 million, in line with expectations. Despite an initial dip following the quarterly results, Spotify shares rebounded, rising 8% in premarket trading on Tuesday.
Since 2006, Spotify has invested heavily in business expansion and securing exclusive content. Some of its podcast collaborations include those with Michelle and Barack Obama, as well as the Duke and Duchess of Sussex. The reported $25 million deal with Harry and Meghan saw 12 episodes delivered over two-and-a-half years before concluding in June last year.
Another way the company has driven revenue growth is through price hikes and experimenting with various subscription plans. The company’s CEO added that the streaming service would also start to offer music-only tiers for customers who don’t need access to the podcasts.
He also noted that: “We are going to add back some marketing spend over the year. Because we want to keep on having the growth and we saw that in some territories, we may have pulled back a little bit too much.”
