Spotify’s finally turning its user growth into serious cash flow

Record profits

The world’s biggest music streaming platform posted one of its best financial quarters ever yesterday. Spotify’s gross profit hit €1bn (~$1.08bn) for the first time in the company’s 18-year history, as revenues jumped 20% and the company printed more than €800m in free cash flow for the last 12 months.

Those headline figures sent shares up more than 11% and impressed Spotify investors — who had once been growing weary of the streamer’s years-long struggle to turn a profit — but, not everything in the report was music to their ears. Its user count, for example, didn’t soar quite as much as expected, even with monthly actives rising 19% year-over-year and paid subscribers climbing a more gentle 14% in the same period.

Let the music do the talking

Co-founder and CEO Daniel Ek was quick to nod to the impact that December staff cuts, which saw ~1,500 workers lose their jobs, have had, telling investors that the layoffs disrupted day-to-day operations “more than [they] anticipated”. However, another proposed round of price hikes could help keep profits healthy, with premium subscriptions set to rise by $1-2 in several markets this month, and in the US later this year.

Whether all of Spotify’s 239 million paid subs will stick around through the rise, the second in as many years, is another question entirely. Ek and other execs will be hoping that the streamer's continued global rollout of audiobook offerings, as well as its expanding range of AI features, will be enough to mollify cost-centric complainers.

Go deeper: Can streaming save the music industry?