Skip to content

Spotify User Growth Soars Despite Falling Short on Revenue Projections

Streaming giant Spotify continues to surprise with robust user growth even as it falls behind on revenue expectations.

Spotify logo
Spotify logo

Impressive User Growth Surpasses Expectations

The Swedish streaming giant, Spotify (NYSE: SPOT), revealed its Q2 results on Tuesday, exceeding projections in terms of monthly active users (MAUs) and subscribers. The company anticipates that the listener count per month will hit 572 million in the current quarter. In the Q2 report, MAUs surged to 551 million, outperforming Spotify's guidance and the analysts' prediction of 526.8 million.

Q2 Revenue Disappoints Amidst Ambitious Expansion

Despite the impressive user growth, Spotify struggled to meet quarterly revenue estimates, according to IBES data from Refinitiv. This shortfall resulted in a 5% drop in Spotify's shares in premarket trading. This comes as the company continues its aggressive and expensive expansion into podcasts and audiobooks, which has taken a toll on the profit margins.

Consistent User Growth: A Silver Lining

Premium subscribers, who represent the majority of the company's revenue, rose by 17% to 220 million, exceeding estimates of 216.6 million. CEO Daniel Ek expressed optimism about the consistent user growth, stating, "It's the sixth consecutive quarter now that user growth has been doing incredibly well, and it's the gift that keeps giving."

The Relationship Between User Growth and Revenue

Despite falling short of analysts' estimates of 3.21 billion euros, Spotify's quarterly revenue was 3.18 billion euros ($3.51 billion), aligning with the company's forecasts. Ek reaffirmed his belief in the growth potential of the company, stating, "If we have user growth, the revenue growth eventually comes - that's the lesson been learned at Spotify and we have seen it over and over."

Potential Impact of Premium Plan Price Hike

The streaming giant increased the prices of its premium plans in several countries, with the expectation that this move would not significantly affect the revenue of this quarter. CFO Paul Vogel specified that the effect of the price hike would start reflecting in September, depending on billing cycles. By Q4, the complete impact of the price increase is expected.

Outlook For the Coming Quarter

For the next quarter, Spotify forecasts the number of premium subscribers to reach 224 million, and revenue to be around 3.3 billion euros. This projection is slightly lower than the analysts' expectations of 222.4 million subscribers and revenue of 3.40 billion euros.