Spotify Posts Record User Growth — And An Increased Operating Loss — In Q4 2022 Earnings Report

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Spotify stock (NYSE: SPOT) has surged after the Stockholm-headquartered company disclosed that it had added a record high of 33 million users during Q4 2022 – including about 10 million subscribers.

The audio entertainment service, which laid off approximately 6% of its employees earlier in January, posted the fourth-quarter financials today. Worth highlighting at the outset is that Spotify had 10,151 full-time employees when 2022 wrapped – up from 9,808 in Q3.

Consequently, the aforesaid layoffs appear to have affected more team members than initial reports (which drew from the Q3 employee figure) stated. Back to the business’s Q4 2022 showing, though, Spotify boasted 489 million monthly active users (MAUs) as of 2022’s end, representing a roughly 20.44% year-over-year (YoY) boost as well as a 7.24% quarter-over-quarter (QoQ) hike.

Within the MAUs total, Spotify identified 205 million paid users (up 5.13% QoQ and 13.89% YoY) and 295 million ad-supported users (up 8.06% QoQ and about 25% YoY). The subscribership increase represents Spotify’s largest quarterly improvement since Q4 2020, while the QoQ MAUs jump is the biggest that Spotify has posted to date.

As of Q4, 28% of Spotify’s MAUs resided in Rest of World (up 6% YoY), compared to 21% for Latin America (flat YoY), 21% for North America (down 2% YoY), and 30% for Europe (down 3% YoY). On the subscriber side, however, the percentages stayed nearly flat across Q4 2021 and Q4 2022, at 39% for Europe, 28% for North America, 21% for Latin America, and 12% for Rest of World.

Similarly, Spotify reported €3.17 billion in total revenue for 2022’s final quarter, up about 4.28% QoQ and 17.74% YoY. As part of the figure, premium income rose by 2.49% QoQ to approach €2.72 billion, per Spotify, with ad-supported revenue having turned in a 16.62% QoQ increase to hit an all-time high of €449 million.

Execs attributed advertising’s double-digit improvement to a bolstered contribution from podcasting, revenue from which increased “in the mid 30% range” YoY. Additionally, the Spotify Audience Network is said to have seen “healthy double digit” QoQ “growth in participating publishers, shows and advertisers.”

On the other side of the coin, Spotify also communicated that its operating loss had climbed from €228 million in the third quarter to €231 million. Higher-ups acknowledged YoY operating-expense growth of around 44% as the chief contributor, pointing specifically to currency fluctuations and heightened “personnel costs primarily due to headcount growth and higher advertising costs.”

“These investments largely reflect various growth initiatives that were greenlit toward the end of 2021 and the impact of recent acquisitions such as Podsights, Findaway, Sonantic, Chartable, Whooshkaa and Heardle,” Spotify explained of the pre-layoff headcount and advertising expansion.

Looking forward to 2023’s opening quarter, Spotify has forecasted 500 million MAUs (including 207 million subscribers), revenue of €3.1 billion, and a net loss of €194 million. At the time of this writing, Spotify stock was up 10.45% from Monday’s close, at $110.45 per share.