Music streaming giant Spotify (NYSE:SPOT) reported a significant 26% increase in its active users for Q3 2023, reaching a total of 574 million. The company projects this figure to exceed 600 million by the end of the year. This surge in active users comes amidst a price hike for premium subscribers and stiff competition with industry giants like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).
In the same quarter, Spotify also saw a 16% rise in paying subscribers, which contributed substantially to an 11% increase in revenue, taking it to €3.4 billion ($3.6 billion). Of this revenue, €2.91 billion ($3.08 billion) was generated from paid accounts, while ad-supported accounts brought in €447 million ($473.29 million).
In a surprising turn of events, Spotify posted a rare quarterly profit of €32 million ($33.88 million), a stark contrast to last year's loss of €228 million. This profit was achieved through strategic cost-cutting measures including layoffs and reduced advertising initiatives which saved the company around €160 million ($169.41 million).
During the earnings call, CFO Paul Vogel and CEO Daniel Ek discussed the company's future strategies. They highlighted increased audiobook consumption and imminent podcasting profitability as key growth drivers, along with the success of their two-sided Marketplace Initiatives. The executives also noted Spotify's free cash flow for Q3 stood at €216 million ($228.65 million).
Despite these promising figures, Spotify has yet to post a full-year net profit. Earlier this year, the company cut approximately 200 positions in its podcast division and slashed about 600 jobs overall, equating to 6% of its workforce.
Since its launch, Spotify has strategically invested over a billion dollars into podcasts and expanded into new markets, growing its staff from 3,000 in 2017 to around 9,800 at the end of 2022. The company's user base expansion in Latin America and the Rest of World regions accounted for a combined 34% of Q3 subscribership share.
Looking ahead, Spotify forecasts an addition of 27 million monthly active users and 235 million subscribers with a Q4 operating profit of €37 million.
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