Music Giant Spotify's Q1 Surprise: Investors Cheer Premium Subscriber Growth And Profit Bump

Spotify Technology SA SPOT reported fiscal first-quarter 2024 revenue growth of 20% year-on-year to $3.95 billion (3.64 billion euros), beating the consensus of $3.85 billion. EPS of $1.05 (97 cents) beat the consensus of $0.70.

Premium Revenue grew 20% year over year to 3.25 billion euros, helped by subscriber additions and ARPU increases. 

Total MAUs (Monthly Active Users) rose 19% Y/Y to 615 million , which missed its guidance by 3 million. A "moderated marketing activity" led to "more normalized growth" following 2023's record performance, the Variety cites Spotify. 

The lower-than-expected MAU growth also came amid "organizational change," referring to Spotify's December 2023 layoffs when the company slashed 17% of its workforce.

Ad-supported MAUs grew 22% Y/Y to 388 million. Premium Subscribers grew 14% Y/Y to 239 million. 

Within Premium, the average revenue per user (ARPU) rose by 5% year over year to 4.55 euros. Ad-supported revenue rose 18% to 389 million euros.

Margins: The gross margin improved by 243 bps to 27.6%, reflecting improved podcast and music profitability. The Premium gross margin was 30.2%, up 155 bps Y/Y, reflecting Marketplace growth. 

The ad-supported gross margin was 6.4%, which is up 947 bps Y/Y, reflecting an improvement in podcast and music profitability. Operating income improved to a new quarterly high of 168 million euros with a margin of 4.6%.

Spotify held 4.7 billion euros in cash and equivalents and generated €207 million in free cash flow.

Outlook: Spotify expects second-quarter revenue of 3.8 billion euros (consensus $3.76 billion) and total MAUs of 631 million. 

Spotify stock gained over 107% in the last 12 months. Investors can gain exposure to the stock via Global X Social Media ETF SOCL and ProShares On-Demand ETF OND.

Price action: SPOT shares traded higher by 8.27% at $294.75 premarket at the last check Tuesday.

Photo courtesy: Spotify