Spotify Adds Subscribers, Ad Revenue Despite Fears of U.S. Economic Malaise

The audio streaming company surpassed forecasts, growing its subscriber base by 19% in its second quarter to reach 433 million monthly users

Spotify Adds Subscribers, Ad Revenue Despite Fears of U.S. Economic Malaise

Spotify said it has 4.4 million podcasts available on its service, while the number of users who listened to shows substantially increased.PHOTO: GETTY IMAGES FOR SPOTIFY

Spotify Technology SA reported accelerated user growth and a lift in advertising revenue in the most recent quarter as the streaming giant thwarts fears that inflation and subscription fatigue are hitting consumers’ wallets.

Spotify reported 433 million monthly active users for the second quarter, a 19% lift from a year ago, topping the company’s expectations. In an investor presentation, Spotify pointed to successful marketing campaigns, reactivations in Europe, and strength among Gen Z listeners in Latin America. Paying subscribers, its most lucrative type of customer, rose 14% to 188 million, exceeding the company’s guidance, partly because of promotions and household plans.

The average revenue per user for the subscription business in the quarter climbed 6% to €4.54. The increase marks the fourth consecutive quarter that the metric increased. Following years of downward pressure on such revenue, the company attracted new subscribers through discounted plans and lower prices in newer markets. Spotify began raising the price of its family plan over a year ago in dozens of markets, including the U.S., which has helped increase revenue per user.

Revenue from subscriptions, which makes up the bulk of Spotify’s top line, increased 22% to €2.5 billion. Advertising revenue rose 31% to €360 million. As it expands its podcast business, ads have become a particular growth area for Spotify. During the quarter advertising made up about 13% of total revenue.

Spotify said it has 4.4 million podcasts available on its service, up from 4 million in the previous quarter, and that the number of users who listened to shows increased in the “substantial double-digits” from a year ago.

In all, revenue rose 23% for the second quarter to €2.86 billion, just topping the company’s guidance.

Spotify reported a loss of €125 million, or 85 European cents a share, compared with a loss of €20 million, or 19 European cents a share, a year earlier.

Free cash flow, a measure of the cash a company generates from operations, and viewed by many investors as a proxy for performance, was €37 million, up from €34 million a year earlier and €22 million in the previous quarter.

Last month, Chief Executive Daniel Ek told employees that Spotify would slow its hiring by 25%, a sign that the company is bracing for a possible recession amid rising interest rates and inflation.

The company expects monthly active users of 450 million for the current quarter and premium subscribers of 194 million.

The company forecast revenue of €3 billion.