With a 16pc jump in premium subscribers and a strong forecast for the fourth quarter, Spotify said it has returned to profitability despite an expected loss.
Spotify’s monthly active users have shot up by 26pc as the streaming giant surprised investors with a better-than-expected performance in its latest earnings report today (24 October).
Total monthly active users of Spotify now stand at 574m while its Premium subscribers rose 16pc to 226m, higher than analyst estimates. Revenue for the third quarter was up 11pc to €3.36bn, around 30m higher than expected.
But perhaps the biggest surprise for investors was the company’s adjusted operating profit of €32m. According to Bloomberg, analysts estimated Spotify would report a loss of around €45m.
Spotify said that the 26pc jump in monthly active users represents its second largest third-quarter net addition performance in history.
Riding on the wave of this strong performance, Spotify said it forecasts crossing the 600m milestone in terms of monthly active users in the fourth quarter. It also expects a revenue of around €3.7bn by the end of December.
In its last earnings report in July, Spotify said that it had seen a 27pc surge in monthly active users while subscribers were up 17pc and revenue grew 11pc to €3.2bn.
Around the same time, the company raised the price for a single Premium subscription from €9.99 a month to €10.99 a month. The increased rate applied to 53 countries in total, including Ireland, the UK, the US, Thailand, Australia and various European countries.
Spotify attributed this price increase to a market landscape that has “continued to evolve” since the streaming service launched in 2006 and said it will use the increase in revenue to “keep innovating” new features for its platform, which is now infused with AI.
At the start of 2023, Spotify revealed plans to cut roughly 6pc of its global workforce, due to the stark difference in operational expenditure compared to revenue growth. In June, the company said it would cut an additional 200 employees from its podcast business.
Last month, the company said it is rolling out a new voice translation feature that uses OpenAI technology to translate podcast episodes while keeping the original voice and style.
Spotify has been investing heavily to integrate AI into its streaming service. Earlier this year, the Stockholm-based company revealed an AI-powered DJ that acts as a sort of virtual assistant to users listening to music through the app.
In January, Microsoft unveiled a text-to-speech AI model called VALL-E that it claimed can simulate anyone’s voice using only three seconds of audio.
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