Daniel Ek, CEO of Swedish music streaming service Spotify, gestures while speaking at a press conference in Tokyo on September 29, 2016.
Toru Yamanaka | AFP | beautiful images
Spotify reported first quarter earnings on Tuesday, posting a record quarterly profit and beating top and bottom line estimates, after a year of cost cutting and streamlining.
Here's how the company did, compared to analysts' expectations:
- Earnings per share: 97 cents versus 65 cents expected by LSEG analysts
- Revenue: $3.64 billion versus $3.61 billion predicted by LSEG analysts
- Monthly active users (MAU): 615 million vs StreetAccount estimate of 618 million
Spotify shares rose more than 10% following the news. The company also beat quarterly gross margin guidance.
The streaming giant went into cost-cutting mode last year, laying off more than a quarter of its staff, according to industry tracker Layoffs.fyi. Spotify walked away from a major deal with controversial podcaster Joe Rogan earlier this year but has otherwise significantly scaled back its ambitions in the podcast business.
Spotify also issued guidance for the upcoming quarter. The company expects new MAUs to be 16 million, bringing total monthly active users to 631 million. It also led to an improved gross margin of 28.1%, driven by cost improvements across the business.
The company told shareholders in a presentation: “Overall, we are encouraged by the strong start to the year and assess the business is well placed to achieve the targets set out at Investor Day 2022”.
Many of the changes the company has made in the past 12 months come after Mason Morfit's ValueAct disclosed its stake in the company in February 2023 and publicly called for streamlining spending. Spotify has laid off 17% of its staff by the end of the year.
Spotify's business itself also showed growth, with MAUs up 19% year-over-year and 2% quarter-over-quarter. However, the company missed its MAU guidance of 3 million users. Spotify attributed the slowdown to “moderated marketing” – driven by cost cuts – leading to “more normal growth”.
ValueAct, which manages nearly $12 billion in assets, has a 0.5% stake in Spotify worth $280 million. When the activist investor first disclosed the position in 2023, it owned about 1.2% of Spotify shares. The value of its initial investment has more than doubled, according to FactSet estimates.
