Spotify disclosed continued losses as well as record user growth in its Q2 2023 earnings report. Photo Credit: Bastian Riccardi
Spotify achieved all-time-high quarterly user growth – and suffered a €247 million operating loss – during 2023’s second quarter, according to a newly released earnings report.
The Stockholm-headquartered audio-entertainment platform posted its Q2 2023 financials this morning, after raising prices in north of 50 markets (including the United States) yesterday. As of June’s end, Spotify had 551 million monthly active users (MAUs), per the document – up 27% from the same stretch in 2022 as well as a record 36 million on a quarterly basis.
“And with six quarters of MAU outperformance,” Spotify head Daniel Ek said during his company’s Q2 earnings call, “we are capitalizing on this momentum, and it’s proving to have a meaningful effect, helping us achieve 10 million net new subscribers this quarter – three million more than we originally anticipated.”
Within the MAUs figure, execs identified 220 million premium subscribers, a figure that spiked 17% year over year (YoY) and 5% quarterly. Meanwhile, Spotify likewise pointed to a double-digit improvement in advertising revenue for Q2 (€404 million, €75 million more than in Q1 but well beneath the typically better-performing fourth quarter) and a smaller boost for its subscribership revenue (€2.77 billion total).
Behind the MAUs total, Spotify disclosed continued growth in “Rest of World” – or all markets outside North America, Latin America, and Europe. To be sure, Rest of World accounted for 30% of MAUs as of Q2’s conclusion, against 21% for Latin America and the remaining 49% for Europe (29%) and North America (20%).
Nevertheless, paid accounts remained heavily concentrated in the latter two regions during Q2, at a 12% share for Rest of World, 21% for Latin America, 28% for North America, and 39% for Europe. But with subscribership growing in any event in markets where Spotify costs comparatively little, the company reported a YoY dip in average monthly revenue per paid user, at €4.27 total.
The streaming service further acknowledged heightened operating expenses (€1.01 billion) and attributed the aforementioned €247 million operating loss (as well as a €302 million net loss) in part “to our real estate optimization plan and severance.”
“In the quarter,” CFO Paul Vogel elaborated during the earnings call, “we took steps to shrink our real estate footprint and rationalize certain areas of our podcasting business. We also exited our Soundtrap marketplace business. We expect all of these moves to have a positive impact on our rate of profitability on a go-forward basis. However, they did result in roughly $135 million of net charges in the quarter.”
Looking forward to the third quarter, Spotify has forecasted 572 million MAUs, 224 million paid users, €3.3 billion in revenue, and a €45 million operating loss. At the time of this writing, Spotify stock (NYSE: SPOT), at $142.80 per share, was down about 13% on the day.
Elsewhere in Spotify’s information-light Q2 earnings call, Ek discussed the potential impact of artificial intelligence, opted not to expand upon the licensing deals that set the stage for yesterday’s price increases (“I’m not going to dive into specifics about anything in our agreements”), and minimized the possible competitive threat posed by TikTok Music (“competition is nothing new”).
Additionally, Ek didn’t have an update on the long-awaited Spotify HiFi, relaying only that “HiFi remains something that we think has value…but we don’t have anything to announce at this point.”