Spotify Reports Q4 2022 Earnings: Strong User Growth and Widened Losses

Spotify Reports Q4 2022 Earnings: Strong User Growth and Widened Losses

UTC by Darya Rudz · 3 min read
Spotify Reports Q4 2022 Earnings: Strong User Growth and Widened Losses
Photo: Depositphotos

For the fourth quarter of the last year, Spotify reported 3.17 billion euros ($3.43 billion) in revenue, which is 18% up from the year-earlier period.

Commercial media services provider Spotify Technology S.A. (NYSE: SPOT) has released its Q4 2022 earnings report. The company has beat expectations, delivering strong revenue and significant growth in its subscriber base. Following the Q4 2022 earnings report, Spotify shares closed 12.72% up yesterday, at $112.72.

Q4 2022: Highlights

For the fourth quarter of the last year, Spotify reported 3.17 billion euros ($3.43 billion) in revenue, which is 18% up from the year-earlier period. The number reflects the premium revenue growth of 18% compared to the last year as well as a 14% growth in ad-supported revenue. According to Spotify, the growth was driven by the subscriber base expansion and podcasting.

Spotify said:

“On a global basis, our music advertising revenue grew mid-single digits year-over-year, reflecting double-digit year-over-year growth in impressions sold, partially offset by softer pricing due to the current macroeconomic environment. Podcast revenue grew in the mid-30 percent range year-over-year, reflecting healthy double-digit year-over-year growth in impressions sold and pricing. The Spotify Audience Network saw healthy double-digit quarter-over-quarter growth in participating publishers, shows and advertisers.”

Further, the music-streaming company highlighted strong growth in its user base. In particular, the number of its monthly active subscribers rose by 20% year over year to 489 million.

Meanwhile, Spotify has also seen its loss widening from 39 million euros ($42 million) to 270 million euros ($292 million) as a result of increased expenses amid “higher personnel costs, primarily due to headcount growth, and higher advertising costs.”

Within its cost-cutting measures, Spotify announced a plan to reduce its headcount by 6% (or 600 employees) just a week before releasing the Q4 2022 report. One of the highest-profile departures was content and ad business chief Dawn Ostroff who had been leading Spotify’s push into podcasting over the past four years.

2023 Outlook

Admitting that 2022 has been a challenging year, Spotify said that 2023 is still “subject to uncertainty.”

Spotify said:

“Looking back on 2022 in its entirety, we are pleased with our overall results. Each year presents certain challenges and opportunities and, over the past 12 months, we largely delivered on our internal goals and we are excited about the momentum we are building heading into 2023.”

As Spotify CEO Daniel Ek explained, the company will continue moving towards its goals in 2023, with shifting to focus on tightening its spending and becoming more efficient.

For the first quarter of 2023, Spotify expects revenue of €3.1 billion and an operating loss of €194 million (including a €35 million-€45 million charge for severance-related expenses in Q1). As for the subscriber base, the company is looking to reach 500 million monthly active users in Q1, which would represent a net gain of 11 million, and 207 million Premium subscribers, implying 2 million net new subscribers in the quarter.

Notably, Wall Street analysts also expect a growth in Spotify subscribers. In May this year, the European Union will impose the Digital Markets Act, and one of the benefits for Spotify will be the ability to promote its cheaper subscription offers. The company will make the offers available outside Apple’s iPhone app.

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