Spotify posted another quarter of better-than-expected subscriber growth in the fourth quarter, helping the Swedish music company record its first-ever annual profit.
Total active monthly users increased to 675 million, Spotify said in a statement on Tuesday. That compared with the average Wall Street estimate of 664.9 million, according to analysts. The company also posted record-high subscriber additions, with paying customers increasing 11 per cent to 263 million, also surpassing expectations.
Chief executive Daniel Ek has been pushing Spotify to expand beyond its dominant position in music streaming, adding audiobooks, podcasts and video, luring more paying subscribers despite two rounds of price increases in a little more than a year. Combined with eliminating some 1,500 jobs, that has helped deliver Spotify’s first full-year profit since it launched in 2008. The company reported net income of €1.14 billion for all of 2024.
Ek acknowledged the company’s transformation, noting that for its first 16 years, Spotify was focused on “driving meaningful scale. We did not worry about profitability,” he said on a conference call with analysts. “Through cost reductions, but then also through the year of monetisation, I think we’re now proving that we’re a great business too.”
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Ek expects the company to continue on its profitable growth trajectory this year, coining 2025 “the year of accelerated execution.” Spotify can “pick up the pace dramatically when it comes to our product velocity,” he said. “We’re going to double down on music, and we’re going to be disciplined doing it.”
In the first quarter, the company expects to add 3 million monthly active users and about 2 million premium subscribers, the company said. Revenue is expected to rise from a year ago to €4.2 billion and gross margin will hit 31.5 per cent, driven by increasing premium subscriptions.
Spotify shares, which gained 138 per cent last year, rose as much as 11 per cent to a record high of $606.95 as trading got under way in New York.
Earlier this year, Spotify launched a new video-creator offering that will compensate contributors based on how much content viewers consume rather than having to rely on ads. The move pits Spotify even more directly against YouTube in the growing market for video podcasts.
Spotify already has more than 300,000 video podcasts on its platform as some 70 per cent of eligible shows and networks have already opted in, chief product and technology officer Gustav Soderstrom said on the call. The company hosts a total of about 6 million podcasts. “We’re incredibly pleased with these early results and we will continue to innovate from here,” he said.
Spotify also triumphed in a court case against a music royalties collection service that tried to argue the service’s bundled subscription, which includes audiobooks and music, was illegitimate.
In January, Spotify reached a new distribution agreement with Universal Music Group that takes into account Spotify’s new business model including new pricing tiers and bundling music and non-music content. Ek said he sees the deal as a “win-win” situation for the music streamer and the record company and sets Spotify up for strong growth. “If we grow, our label partners and ecosystem will benefit from this too,” Ek said, without providing more details of the deal. – Bloomberg
