Spotify Technology reported strong fiscal fourth-quarter earnings on Tuesday, beating revenue expectations. The audio giant also posted a record-breaking quarter of subscriber gains, with monthly active users (MAUs) rising by 35 million to hit a total of 675 million.
Spotify’s stock surged in early trading, rising around 10%, following the report. Over the past year, the company’s shares have surged to all-time highs, up roughly 170%.
The company guided to first-quarter MAUs of 678 million, also ahead of estimates. Spotify reported a fourth-quarter profit of €367 million ($380 million), or €1.76 euros per share, surpassing analysts’ expectations.
Gross margins jumped to a record 32.2%, with the company setting quarterly records for revenue, gross margin, operating income, and free cash flow. CEO Daniel Ek attributed the success to the company’s “efficiency” strategy and its ability to drive higher gross margins and operating margins.
Ek expressed confidence in 2025, calling it “the year of accelerated execution.” The company plans to double down on music and be disciplined in its efforts. With advancements in AI, Spotify feels good about being able to execute its plan.
The company’s turnaround is attributed to a business overhaul that included mass layoffs, C-suite shakeups, and a strategic shift away from podcasts. A new multiyear distribution agreement with record label Universal Music Group (UMG) will also benefit the company, with greater scale and “very strong growth” expected as a result.
Spotify’s CEO said there is no ‘win, lose’ dynamic between the company and labels, but rather a ‘win, win’ dynamic. The company expects price hikes to remain part of its toolkit and will adjust prices when it makes sense.
Source: https://finance.yahoo.com/news/spotify-stock-jumps-after-reporting-its-first-full-year-of-profitability-strong-user-metrics-111918859.html