Spotify’s Q3 results show a major leap in subscription revenue, which jumped to 3.51 billion euros ($3.86 billion)—a 20.8% increase from last year. The platform added 6 million premium users, bringing its total to 252 million subscribers. This steady growth, combined with strategic price hikes across several markets, pushed Spotify’s operating profit to 454 million euros ($500 million), marking a 70% increase from Q2. The quarter’s results reveal Spotify’s strength in balancing subscriber growth with a clear path to profit, a feat that investors have been waiting for.
Spotify’s pivot toward profitability reflects significant cost-cutting efforts, including last year’s workforce reduction of nearly 25%. These moves finally allow Spotify’s results to align with its market dominance.
Higher Margins and Premium Gains Power Revenue Growth
Spotify also reported a boost in its gross margin, which reached 31.1%, a substantial increase from previous quarters. Higher revenue from premium subscriptions drove this improvement, along with contributions from audiobook and ad-supported revenue. Notably, premium average revenue per user grew 9% to 4.71 euros ($5.18). Spotify’s ability to retain users despite price adjustments highlights its strength in delivering value to listeners while increasing revenue.
This quarter’s balance of user acquisition and higher returns reflects Spotify’s success in achieving both growth and profitability.
Ad Revenue Lags, But Stock Soars
While subscription revenue continues to dominate, the company’s freemium model still holds potential. Advertising revenue reached 472 million euros ($520 million), growing 5.6% from Q2 and 3.5% from last year. Though ad growth faces pricing challenges, investors reacted positively. After stock rose 9% in after-hours trading after reaching a record high of $419.72 earlier in the day. The stock has gained 123% in 2024, affirming investor confidence in Spotify’s balanced strategy.
For more on Spotify’s financial report, check out the full disclosure, here.
