Spotify, the popular audio streaming service, announced impressive results for the second quarter of 2024. The company reported a significant increase in paying subscribers, reaching 246 million, a 12% year-over-year growth. This surpassed expectations, with 7 million new paid subscribers added, exceeding guidance by 1 million.
Shares of Spotify surged by 14% in pre-market trading following the positive earnings report. The company attributed part of its success to the introduction of a new, more affordable ad-free plan priced at $10.99 per month, excluding audiobooks. Additionally, price adjustments made earlier in the year contributed to improved revenue.
Spotify's total monthly active users reached 626 million, a 14% increase from the previous year, although slightly below the company's initial forecast of 631 million. The company acknowledged variability in monthly active users but highlighted strong conversion rates in developed markets due to recent pricing adjustments.
CEO Daniel Ek emphasized the importance of converting free users in developing markets to paid subscribers, noting differences in user engagement and conversion rates. Spotify plans to enhance its marketing strategies in these regions to drive user growth.
Financially, Spotify reported total revenue of €3.8 million, in line with expectations, and operating income above guidance at €266 million. The company's gross margin improved to 29.2%, driven by growth in music and podcasting, despite costs associated with its audiobooks offering.
Spotify's advertising revenue grew by 13%, with gains in music and podcast advertising. The company remains optimistic about podcast engagement, particularly with the introduction of video content, which has shown higher levels of user interaction.
In the third quarter, Spotify forecasts reaching 251 million paid subscribers and 639 million total monthly active users, reflecting continued growth and innovation within the company.
CEO Daniel Ek expressed confidence in Spotify's future prospects, highlighting the company's evolution from a great product to a great business, exceeding internal expectations and setting a positive trajectory for the future.
