Spotify’s Stock Soars 10% on Surprise Q3 Profit — First in 18 Months, Thanks to Price Hikes and Cost Savings

In a remarkable turnaround, Spotify reported an unexpected profit for the third quarter, marking its first profitable quarter in a year and a half. The company’s stock surged by 10% in response. Spotify’s shares have more than doubled in value in 2023, soaring by approximately 112% this year.

The Swedish music streaming giant attributed its 65 million euros ($68.9 million) profit to cost-cutting measures and lower marketing and personnel expenses. Earlier in the year, Spotify underwent a strategic restructuring in its podcasting division, resulting in the layoffs of 200 employees, constituting 2% of its workforce.

Here’s how Spotify’s Q3 performance compares to Wall Street expectations:

– Earnings per share: 33 euro cents, surpassing the expected loss of 22 euro cents (according to LSEG, formerly known as Refinitiv).

– Revenue: 3.36 billion euros, slightly exceeding the anticipated 3.33 billion euros (according to LSEG).

– Premium subscribers: 226 million, surpassing the expected 224 million (according to StreetAccount).

Spotify implemented price increases for its subscription plans earlier this year, raising users’ monthly bills by $1 to $2, depending on their selected plan. In its Q3 earnings report, Spotify cited the “early effects of price increases” as contributing to an 11% year-over-year revenue growth.

CFO Paul Vogel noted that, historically, price increases have had minimal effects on subscriber churn, and the company witnessed an acceleration in subscriber additions for the quarter.

Spotify also announced plans to offer access to over 150,000 audiobooks for its subscribers, expanding into this audio format after venturing into podcasts in 2015. This move is seen as a strategic effort to remain innovative in the audio industry.

Spotify’s CFO expects continued profitability in the fourth quarter of 2023 and into 2024, marking a significant turning point for the company.