Spotify reports record quarterly profit, after a year marked by mass layoffs and staff attention

Spotify After reporting first-quarter earnings after a year of deep cost cuts and streamlining, the company posted a record quarterly profit on Tuesday, missing both revenue and profit estimates.

Here’s how the company performed compared to analysts’ expectations:

• Earnings per share: LSEG 97 cents vs. 65 cents expected by analysts
• Income: LSEG at US$3.64 billion compared to the US$3.61 billion expected by analysts
• Monthly Active Users (MAU): 615 million vs. StreetAccount’s estimate of 618 million

Influenced by this news, Spotify’s stock price rose more than 10%. The company’s quarterly gross margin also beat expectations.

The streaming giant went into cost-cutting mode last year, cutting more than a quarter of its workforce, according to industry tracker Layoffs.fyi. Earlier this year, Spotify canceled a major deal with controversial podcaster Joe Rogan but has otherwise scaled back its podcasting ambitions significantly.

Spotify also released guidance for the upcoming quarter. The company expects net new monthly active users to be 16 million, bringing the total number of monthly active users to 631 million. Gross profit margin also improved by 28.1%, driven by cost improvements across the business.

“Overall, we are encouraged by the strong start to the year and believe the business is well positioned to meet the goals outlined at Investor Day 2022,” the company told shareholders in a presentation.

Many of the changes made by the company in the past 12 months come after Mason Morphit’s ValueAct revealed a stake in the company in February 2023 and public calls to rationalize spending. Spotify has laid off 17% of its workforce by the end of the year.

Spotify’s business itself grew, with monthly active users up 19% year over year and 2% month over month. Still, the company fell short of its goal of 3 million users. Spotify blamed the slowdown on a “slow marketing activity” – driven by cost-cutting – which “further normalized growth”.

ValueAct manages about $12 billion in assets and owns a 0.5% stake in Spotify worth $280 million. When the activist investor first disclosed the position in 2023, it held about 1.2% of Spotify. According to FactSet estimates, the value of its initial investment has more than doubled.