Spotify expects strong profits for the last three months of the year, beating analysts’ forecasts. The music streaming giant believes more people will sign up, and recent price increases will boost its earnings during the crucial holiday season. This positive outlook arrives shortly after founder and CEO Daniel Ek announced he will transition to executive chairman in January, stepping down from his CEO role.
For the fourth quarter, Spotify predicts an operating income of 620 million euros (about $723 million). This figure is slightly more than the 618.6 million euros analysts had estimated. The company also surpassed its profit expectations for the third quarter.
Spotify has been raising its prices in recent years to grow its income, confident that its widespread use ensures users will continue to subscribe. For instance, it increased the cost of its individual premium plan in over 150 different markets during the July-September period. CEO Daniel Ek shared that the company’s main goals are to boost overall growth, attract more users in new markets, and expand its content offerings to include more podcasts, videos, and audiobooks. He believes there is still significant room for Spotify to expand its core business.
To attract more listeners, Spotify rolled out new features, including a long-awaited high-quality audio option called lossless audio. The company also significantly expanded its audiobook collection, now offering 500,000 titles across 14 markets since launching roughly 2 years ago. Spotify stated that this expansion has helped increase both audiobook listeners and listening hours by more than a third. The company has also focused on video content, now offering nearly 500,000 video podcasts on its platform.
In the third quarter, the number of paying subscribers rose by 12% to 281 million. The total number of monthly active users grew by 17 million to 713 million, exceeding expectations. For the current quarter, Spotify expects to add 8 million more premium subscribers, bringing its total to 289 million. This figure is slightly below some predictions, partly due to strong competition from Apple and Amazon’s music streaming services. However, its forecast of 745 million total monthly active users is higher than analysts’ expectations.
Spotify’s fourth-quarter revenue forecast is 4.5 billion euros, in line with analyst expectations. Its third-quarter revenue also topped expectations, rising by 7%. While Spotify’s shares saw a small dip in volatile trading today, the stock has still climbed by about 44% this year.
