Spotify Stock Jumps After Q1 2023 Earnings Report Reveals Subscriber Growth and Continued Losses

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Spotify stock (NYSE: SPOT) jumped by almost seven percent following the release of the company’s Q1 2023 earnings report.

Spotify stock spiked by almost seven percent after the company revealed that it had achieved 15 percent year-over-year (YoY) subscriber growth and suffered an over $170 million operating loss during 2023’s opening quarter.

Stockholm-headquartered Spotify (NYSE: SPOT) posted its Q1 2023 financials this morning, emphasizing in the corresponding resource that “nearly all” key performance indicators had “surpassed expectations.” Amid the service’s continued expansion into emerging markets, monthly active users (MAUs) jumped past the half-billion mark to hit 515 million at the quarter’s end, per the document.

The total represents an approximately five percent quarter-over-quarter (QoQ) boost as well as a 22 percent hike from last year’s initial quarter. Behind the figure, Spotify attributed 28 percent of MAUs to Rest of World (up from 23 percent at 2022’s beginning), compared to 30 percent for Europe (down three percent YoY), 20 percent for North America (also down three percent YoY), and 21 percent for Latin America (down one percent YoY).

Q1 2023 was the first quarter in which Latin America’s share of Spotify MAUs surpassed that of North America. Additionally, given the rapid streaming-driven music growth in distinct “Rest of World” markets throughout the Middle East, Africa, and Asia, logic suggests that execs may attempt to paint a more detailed usership picture in future performance analyses.

Back to the audio-entertainment platform’s Q1 showing, included within the 515 million identified MAUs were 210 million subscribers (up 15 percent YoY and two percent quarter over quarter), according to Spotify.

As usual, these paid accounts put up the vast majority of quarterly revenue (€2.71 billion/$2.97 billion, up 14 percent YoY but flat QoQ), whereas advert revenue slipped 27 percent QoQ to €329 million/$361.13 million. The latter signifies a 17 percent YoY increase, and Q1 2023 was the first opening quarter to deliver north of €300 million in advertising income, higher-ups drove home.

Premium accounts’ average per-user revenue came in at €4.32/$4.74, the company disclosed, while execs pointed to “softer pricing due to the current macroeconomic environment” when explaining advertising’s quarterly falloff.

Shifting to the spending side, in spite of employee, podcasting, live audio, and gaming cutbacks, Spotify’s expenses are said to have risen 36 percent YoY during Q1 as a result of “higher personnel costs related to the headcount expansion” undertaken during 2022. And as mentioned at the outset, the business’s first-quarter operating loss totaled €156 million ($171.21 million), down from €231 million ($253.52 million) in Q4 2022.

“There’s really no question that we’ve become leaner in the last six months, but this progress is still early in its reflection on our financials,” Spotify head Daniel Ek said during his company’s earnings call. “The actions we’ve taken, coupled with other opportunities to reduce spending in areas like marketing and content production and real estate, should lead to a steady progression of key metrics throughout the year.”

Later, when asked about forthcoming exclusive-podcast renewals, Ek seemed to signal that Spotify doesn’t intend to throw billions more at programming. “I think you’re right in calling out the overpaying and overinvesting. What I can start out by saying is we’re not going to do that. We’re going to be very diligent in how we invest in future content deals. The ones that aren’t performing, obviously we won’t renew. And the ones that are performing, we will obviously look at those on a case-by-case basis on the relative value.”

Spotify has forecasted 530 million MAUs (including 217 million subscribers), €3.2 billion ($3.51 billion) in revenue, and an operating loss of €129 million ($141.57 million) for the second quarter. At the time of writing, Spotify stock was up about seven percent from yesterday’s close, at $140.13 per share.

Worth mentioning in conclusion is that Ek was (predictably) asked about the growing prevalence of AI tracks during the Q1 earnings call, and the 40-year-old appeared to strike a noncommittal tone when responding.

“We’re in constant dialogue with the industry about these things, and it’s important to state that there’s everything from what you mentioned, sort of fake tracks from artists, which falls in one bucket, to everything of just augmenting, using AI to allow for expression, which probably falls in the more lenient and easier bucket.

“So these are very, very complex issues that don’t have a single straight answer… But we’re in constant discussion with our partners, creators, and artists, and want to strike a balance between allowing innovation and of course protecting the artists,” said Ek.