Spotify (SPOT) Stock: Company Projects Q4 Profit Above Expectations on User Growth

TLDR

• Spotify forecasts Q4 operating income of 620 million euros, slightly above Wall Street estimates of 618.6 million euros.
• Premium subscribers rose 12% to 281 million in Q3, meeting estimates, while monthly active users reached 713 million, exceeding expectations.
• The company’s Q4 revenue forecast of 4.5 billion euros came in below analyst estimates of 4.57 billion euros.
• Spotify announced CEO Daniel Ek will become executive chairman in January as the company adopts a co-CEO structure.
• Audiobook listeners climbed 36% and the company partnered with OpenAI to integrate Spotify recommendations into ChatGPT.

Spotify released its third-quarter earnings on Tuesday and provided guidance for the fourth quarter. The streaming platform forecasts operating income of 620 million euros for Q4, topping analyst expectations.

The Swedish company reported third-quarter revenue of 4.27 billion euros, a 7% increase from the prior year. This beat analyst estimates of 4.23 billion euros.

Spotify Technology S.A., SPOT

Premium subscribers grew 12% year-over-year to reach 281 million in the third quarter. The figure matched analyst projections for the period.

Monthly active users increased by 17 million during the quarter. The total reached 713 million, surpassing Wall Street forecasts of fewer users.

The company has raised prices on its premium individual subscription plans. It also reduced spending on marketing and personnel to improve its financial performance.

Spotify expects Q4 revenue of 4.5 billion euros. This forecast falls short of analyst estimates of 4.57 billion euros.

Leadership Changes and New Features

The earnings report marks the first results since Spotify announced a major leadership change in September. Founder and CEO Daniel Ek will transition to executive chairman in January.

The company will adopt a new co-CEO structure starting next year. This represents a shift in how Spotify’s leadership team will operate.

Spotify rolled out several new features recently, including a lossless audio option. The high-quality streaming feature had been requested by users for some time.

The company reported strong growth in its audiobook business last month. Audiobook listeners increased 36% and consumption hours grew 37% over the past year.

Younger audiences drove much of the audiobook growth. Spotify added audiobooks to paid subscriptions roughly two years ago.

ChatGPT Integration and Q4 Outlook

Last month, Spotify partnered with OpenAI to integrate with ChatGPT. Users can now link their Spotify accounts within the chatbot.

The integration allows users to request music or podcast recommendations through conversational prompts. The feature aims to boost both user growth and engagement on the platform.

For the fourth quarter, Spotify projects monthly active users will reach 745 million. This estimate exceeds analyst projections of 737.3 million users.

The company forecasts an increase of 8 million premium subscribers in Q4, bringing the total to 289 million. This projection sits slightly below analyst estimates of 290.9 million.

Spotify’s stock has risen 40.7% year-to-date despite recent volatility. The shares fell 5.32% over the past month leading up to the earnings release.

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