Spotify ((SPOT)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Spotify’s recent earnings call painted a largely positive picture, underscoring the company’s robust user growth, innovative product developments, and strong financial performance. Despite some challenges in the advertising sector and managing churn from recent price hikes, the overall sentiment was optimistic, with the positive aspects significantly outweighing the negatives.
Surpassing 700 Million Monthly Active Users
Spotify has achieved a remarkable milestone by surpassing 700 million monthly active users. This achievement not only exceeded their guidance but also demonstrated strong user fundamentals, reinforcing Spotify’s position as a leader in the streaming industry.
Strong Subscriber Growth
The company reported continued subscriber growth across all regions, with users spending more time on the platform than ever before. The subscriber count reached 281 million, marking a 12% increase year-on-year, highlighting Spotify’s ability to attract and retain users.
Revenue and Gross Margin Beat
Spotify exceeded expectations in revenue, gross margin, and operating income. The total revenue stood at €4.3 billion, with a gross margin of 31.6%, showcasing the company’s strong financial health and operational efficiency.
Successful Product Innovations
Spotify introduced over 30 new core features, significantly enhancing user engagement and retention. Innovations such as Lossless audio, in-app messaging, and an improved Apple TV app have been pivotal in maintaining Spotify’s competitive edge.
Growth in Video Podcasts
The platform experienced a 54% year-over-year increase in users streaming video podcasts, with nearly 500,000 video podcast shows now available. This growth underscores the increasing popularity and strategic importance of video content for Spotify.
Expansion in Audiobooks
Spotify expanded its audiobook offerings to 14 global markets, tripling its catalog in English language markets. This led to a 36% year-over-year increase in audiobook listeners, highlighting the company’s successful diversification strategy.
Challenges in Advertising Business
The advertising segment showed mid-single-digit growth on a like-for-like basis, indicating a need for improved execution and strategic adjustments. This area remains a challenge for Spotify, requiring focused efforts to enhance performance.
Pricing and Churn Considerations
Spotify anticipates a small amount of churn due to recent price increases across more than 150 markets. However, the company remains confident in its ability to manage these challenges while maintaining steady retention rates.
Forward-Looking Guidance
Looking ahead, Spotify forecasts 745 million monthly active users and 289 million subscribers for Q4 2025. The company projects a total revenue of €4.5 billion, representing a 13% constant currency growth. These projections reflect Spotify’s confidence in sustaining its growth trajectory.
In conclusion, Spotify’s latest earnings call highlighted a predominantly positive outlook, driven by strong user growth, innovative product offerings, and solid financial performance. While challenges in advertising and churn management persist, the company’s strategic initiatives and forward-looking guidance suggest a promising future.