Spotify Exceeds Expectations in Q4, Projects Favorable Growth

Spotify (SPOT.N) on Tuesday reported fourth-quarter monthly active users and subscribers ahead of expectations as it grew in all regions and said revenue and profitability trends looked favorable this year, sending its shares up 8%.

Diversification Efforts and Strategic Moves:

The Swedish music streaming company has ventured into podcasts and audiobooks to grow its user base to 1 billion by 2030. It has also raised prices for its subscribers and laid off thousands of employees to boost profits.

The number of monthly active users rose 23% to 602 million in the fourth quarter, beating Spotify’s guidance and analysts’ forecasts of 601.33 million. 

Premium subscribers, who account for most of the firm’s revenue, rose by 15% to 236 million, topping estimates of 235.1 million, according to IBES data from LSEG.

Revenue Performance and Outlook:

However, quarterly revenue, which rose 16% to 3.67 billion euros ($3.94 billion), missed estimates of 3.72 billion as it took a hit from foreign exchange losses. Its first-quarter revenue is also expected to fall below expectations.

“We have plenty of levers to pull, including price increases, so you will see us work with all of these levers at various times and in various markets,” CEO Daniel Ek said in an interview. “We are now much more focused on the bottom line as well.”

Spotify has also been funding heavily in its podcast business, including signing hosts with big followers, such as Joe Rogan, and podcast advertising grew by double digits in the quarter.

Outlook and Future Projections:

The company expects current-quarter premium subscribers to reach 239 million, which is above estimates of 238.3 million. 

However, the first-quarter forecast was below Wall Street’s total users and revenue expectations.

Adjusted Operating Income Forecast:

Spotify’s monthly user forecast for the quarter of 618 million undershot estimates of 618.8 million. 

It expects operating income of 180 million euros in the current quarter after posting a fourth-quarter operating loss of 75 million euros.