Spotify Technology(NYSE:SPOT) reported fiscal first-quarter earnings on Tuesday, surpassing expectations on both earnings and revenue fronts. The streaming giant also transitioned to profitability as it continues to execute its efficiency strategy.
In the past year, Spotify has undergone multiple rounds of layoffs, implemented price increases, and pursued other initiatives to drive top-line growth and enhance margins. The company now aims to be more deliberate in its future investments, particularly after investing billions in expanding into the competitive podcast market.
Operating income for the quarter stood at 168 million euros ($179 million), a significant improvement from the prior-year period’s loss of 156 million euros. Despite social charges exceeding expectations due to share price appreciation, Spotify’s Q1 performance outpaced company guidance.
Guidance for Q2 operating income is robust at 250 million euros, well above Wall Street consensus expectations. Additionally, revenue guidance for the second quarter exceeds estimates, with anticipated earnings of 3.8 billion euros.
Spotify plans to raise prices by $1 to $2 a month in select markets, including the UK, Australia, and Pakistan, with US prices expected to follow suit later this year. This move aims to bolster revenue streams.
The streaming service’s net income for the quarter reached 197 million euros ($210 million), translating to earnings of 0.97 euros per share, ahead of analyst expectations. Gross margins exceeded projections, coming in at 27.6%, and are expected to further improve to 28.1% in Q2, primarily driven by enhancements in music and podcasting segments.
Revenue for the quarter totaled 3.64 billion euros ($3.88 billion), a 20% increase compared to Q1 2023, surpassing Wall Street’s expectations.
Despite total monthly active users falling slightly below company estimates, Spotify remains optimistic about Q2 MAU projections and the growth of its premium subscriber base.
Spotify’s commitment to profitability has garnered positive attention from analysts, leading to a surge in its stock price over the past year. The company’s strategic initiatives, including restructuring its podcast strategy and securing new distribution deals, aim to maximize revenue and broaden its audience reach.
Featured Image: Freepik
