Daniel Ek says Spotify has “never been in a stronger position” as the streaming giant set itself on track for its first full year of profitability, capping a remarkable 2024 turnaround following the turmoil of last December’s mass layoffs.
Spotify beat expectations across several key metrics in its third quarter of 2024, growing monthly active users (MAUs) by 11% year-on-year to 640 million people, while subscribers rose 12% to 252 million. The group also expanded revenues by double digits and set a new record for operating income.
Shares in the company rose nearly 7% in U.S. postmarket trading on the back of the results.
"We’ve never been in a stronger position, thanks to the outstanding execution by our team. I’m incredibly proud of the way we’ve delivered and the progress we’ve made,” Ek said.
“We’re where we set out to be—if not a little further—and on a steady path toward achieving our long-term goals. This relentless pursuit of innovation and commitment to growth sets us up to deliver the most valuable user experience in the industry, while reinforcing the core strengths that make Spotify unique. I am very excited about what lies ahead for us."
Ek said he was as energized as he had ever been about the current state of technology and how Spotify can leverage the explosion of AI to boost its growth.
Spotify’s remarkable turnaround
Spotify has mounted a huge turnaround effort following a rocky 2023, where falling subscriber growth and shaky results from a $1 billion bet on podcasting hit the company’s margins.
Shares in the company experienced a protracted decline between 2021 and 2023, as investors fretted the streaming giant would be eclipsed by rival platforms including Apple Music.
As part of major turnaround plans, last December the group laid off 17% of its workforce, or around 1,500 staff, last December, as CEO Ek said employees were doing too much “work around the work.”
There were teething pains following the layoffs. Speaking during its first quarter earnings call this year, Ek highlighted the unexpected impact of the layoffs as one of the reasons it failed to hit its guidance on profitability and MAU growth. Ek said the layoffs affected day-to-day operations “more than we anticipated.”
Speaking to Raconteur in October, Spotify’s chief human resources officer Katarina Berg explained the layoffs were a “shock to the system” for employees.
“Spotify had been in hypergrowth and this was the only thing people knew,” she adds. “A lot of people at Spotify had never seen a recession and it was a lot to absorb and digest.”
Spotify’s former CFO Paul Volger was also culled during Spotify’s mass layoffs. On its latest earnings call, Ek unveiled the arrival of Vogel’s successor, Christian Luiga, formerly of the aerospace and defense group Saab AB.
The group has managed to successfully roll out gradual price rises for its key Spotify subscription, with a subscription setting U.K. customers back £11.99 per month, which don’t appear to have hit on growth.
“When someone thinks we’ve reached a ceiling, we’ve found new ways to drive up engagement while driving down the churn,” Ek said on his call with investors.
Despite the early turmoil, Spotify’s efficiency drive seems to have paid off. The company’s share price is up more than 120% in the year to date as the group continuously exceeded its key metric targets in 2024.
