- Spotify’s year-over-year revenue increased 16% to hit €5 billion, and diluted earnings per share came in at €2.48
- Wall Street was expecting earnings of €2.84 per share and revenue of €4.98 billion
- Monthly active users grew 11% to hit 788 million, and Premium subscribers grew 9% to hit 306 million
Spotify reported third-quarter results that were slightly better than Wall Street expectations, with revenue of €5.0 billion narrowly beating estimates of €4.98 billion in the period.
Both overall subscribers and Premium subscribers also saw notable lifts. Monthly active users for the quarter came in at 788 million, an increase from the 777 million MAUs the company reported last quarter. That lift was also in line with Spotify’s expectations. However, the company’s 9% increase in Premium subscribers surpassed expectations and was driven by quarter-over-quarter growth in Latin America, Europe, North America and the rest of the world.
Spotify also offered a glimpse into the global breakdown of its free versus paying subscribers. In Sweden, which is the company’s first and most established market, 50% of Spotify consumers pay for the streaming service. In the U.K. and Germany, about 20-25% pay for the service, and in Latin America that figure is around 11%. Overall, about 4% of Spotify’s global audience pays for the streamer.
“When we went public in 2018, we had 71 million [paying] subscribers. Since then, every single year, we’ve been adding 25 million subs or more, and this year, we expect to reach 316 million subscribers,” Alex Norström, co-CEO of Spotify, said on Thursday morning during the company’s earnings call. “As I’ve mentioned before, very few consumer subscription businesses have ever reached this scale, and few are still adding at this pace.”
Gross margin and operating income for the quarter also came in ahead of expectations. Gross margin for the period was 33.0%, whereas operating income reached €672 million, a 15% increase compared to last year. That latter lift was due to marketing and personnel-related costs that were lower than previous financial forecasts.
The company also opened up about its ad business, a portion of the company that Spotify has been rebuilding. In the third quarter, ads grew 9% at constant currency, which is up from 3% in each of the first two quarters of the year. The company also revealed that sponsorship products are growing, especially in podcasts.
“We’re moving in the right direction, and there’s more progress ahead,” Norström said.
Though it’s likely too early to see the effects of these initiatives appear in this quarter, Spotify launched several new offerings throughout this financial period. The company unveiled Taste Profiles for Premium users in the U.S., an AI-powered feature that lets users shape how the algorithm understands their preferences; rolled out Creator Memberships, an option that lets users subscribe directly to their favorite podcasters through Spotify; and expanded the Spotify Partner Program in over 35 new markets. The streamer also announced a major audiobooks expansion, from 22 markets to 180 markets by the end of 2026.
Thursday’s earnings call also heavily focused on Spotify’s partnership with Meta’s AI agent Muse, another new development that has yet to significantly impact the streamer. In late September, Spotify announced that users will be able to connect their accounts to Muse, an option that’s also available for Claude and ChatGPT. Spotify was the only media service that was integrated into Muse at launch.
“This is actually a positive data loop for Spotify, rather than the other way around,” Gustav Söderström, co-CEO of Spotify, explained. “The reason we built [taste models] is because this is a value of Spotify. Our agent is the best in the world at understanding your taste across all of these mediums. We are not sending the data to these partners. They are asking us about something. We do the reasoning over everything we know about you, and then decide what to play for you.”
Muse launched last month in the U.S. and Canada, and Meta CEO Mark Zuckerberg on Wednesday touted that the agent has already garnered 10 million users. Zuckerberg teased an expansion to other countries, but said the computational demands of the service means there’s technical work required before other regions can access the agent.
Looking ahead to the fourth quarter of the year, Spotify predicts its MAUs will hit 818 million and Premium subscribers will hit 316 million. Growth is not expected to be as robust as last year’s all-time high where Spotify benefited from rolling out a new free tier. Total revenue is predicted to hit €5.2 billion in the fourth quarter, owing to recent pricing changes and the rollout of audiobooks.
