According to a newly released earnings report, Spotify delivered record quarterly user growth in the second quarter of 2023 — and suffered an operating loss of €247 million.
The Stockholm-based audio-entertainment platform released its financial results for the second quarter of 2023 this morning after raising prices in more than 50 markets (including the United States) yesterday. At the end of June, Spotify had 551 million monthly active users (MAUs), according to the document — a 27% increase from the same period in 2022 and a record 36 million on a quarterly basis.
“And with six quarters of MAU outperformance,” Spotify CEO Daniel Ek said during his company’s second-quarter earnings call, “we’re capitalizing on this momentum and it’s been shown to have a meaningful impact, helping us add 10 million net adds this quarter — three million more than we originally anticipated.”
Within the MAUs count, executives identified 220 million premium subscribers, a number that grew 17% year-on-year (yoy) and 5% quarter-on-quarter. Meanwhile, Spotify also pointed to a double-digit improvement in ad revenue for the second quarter (€404 million, up €75 million from the first quarter but well below the normally better-performing fourth quarter) and a smaller increase in subscription revenue (€2.77 billion in total).
Behind the total number of MAUs, Spotify reported continued growth in the “rest of the world” – meaning all markets outside of North America, Latin America and Europe. Certainly, at the end of Q2, 30% of MAUs were in the rest of the world, versus 21% in Latin America and the remaining 49% in Europe (29%) and North America (20%).
Still, paid accounts remained heavily concentrated in the latter two regions in Q2, with a 12% share for the rest of the world, 21% for Latin America, 28% for North America, and 39% for Europe. But with subscriber numbers definitely growing in markets where Spotify costs comparatively little, the company reported a year-over-year decline in average monthly revenue per paying user to a total of €4.27.
The streaming service also acknowledged increased operating expenses (€1.01 billion) and attributed the aforementioned €247 million operating loss (and a net loss of €302 million) in part “to our property improvement plan and severance package.”
“During the quarter,” CFO Paul Vogel said during the earnings call, “we took steps to downsize our real estate footprint and streamline certain areas of our podcasting business.” We also exited our Soundtrap Marketplace business. We anticipate that all of these steps will have a positive impact on our profitability in the future. However, they resulted in net charges of approximately $135 million during the quarter.”
Looking ahead to the third quarter, Spotify forecast 572 million MAUs, 224 million paying users, revenue of €3.3 billion and an operating loss of €45 million. At the time of writing, Spotify (NYSE:SPOT) stock is down about 13% on the day at $142.80 per share.
Elsewhere in Spotify’s informative second-quarter earnings conference call, Ek discussed the potential impact of artificial intelligence, opted not to delve any further into the licensing agreements that set the stage for yesterday’s price hikes (“I won’t go into details about anything in our agreements”), and minimized the potential competition threat from TikTok Music (“Competition is nothing new”).
Additionally, Ek didn’t have an update on the long-awaited Spotify HiFi, merely sharing that “HiFi continues to be something we believe has value… but we have nothing to announce at this time.”