Spotify Technology SA shares experienced a significant boost, marking the largest one-day jump in nearly two years, following the announcement of a first-quarter profit. This surge is fueled by a considerable increase in the number of paid subscribers, which grew by 14% year-on-year to 239 million, matching analysts’ expectations.
Spotify’s total number of active users, including those on ad-supported plans, rose to 615 million, slightly below analysts’ forecast of 617.9 million. Despite this minor gap, the Swedish company demonstrated resilience and adaptability in a competitive market.
The company’s shares surged by 16%, reaching $314.80 in New York, the biggest intraday gain since July 2022. This upward trend is a reflection of Spotify’s continued success in diversifying its business model beyond music streaming, venturing into other audio entertainment categories, including audiobooks.
Spotify’s Strategic Shift in Business Model and Pricing
To maintain its growth trajectory, Spotify is evolving its business model. The company, known for its strict adherence to free-with-ads and paid-without-ads models, is experimenting with new pricing plans, including tiers without audiobooks for a lower monthly fee and music-only options. This shift comes after Spotify’s first price increase in more than a decade and plans for another hike by the end of the month.
Total revenue for the quarter rose 20% to 3.6 billion euros ($3.8 billion), with a net income of 197 million euros. The adjusted operating profit reached 168 million euros, a record high for the company.
Spotify’s push into audiobooks has gained traction, with 25% of users who have access to the offering clicking play at least once. Despite cuts in staff and podcast programs, Spotify continues to strengthen its position in the audio entertainment sector, renewing deals with key figures like comedian Joe Rogan and expanding distribution to platforms like YouTube and Apple Podcasts.
Outlook for the Second Quarter
Spotify expects to reach 631 million active users in the second quarter, with 245 million premium subscribers. While these figures are slightly below analysts’ forecasts, the company remains optimistic. Management anticipates sales of 3.8 billion euros, slightly above the average forecast of 3.76 billion euros, and an operating profit of 250 million euros, exceeding analysts’ predictions of 175.3 million euros.
For more details on Spotify’s first-quarter results and its future projections, visit Bloomberg.
