Spotify reports quarterly monthly active users below estimates

Spotify reported quarterly monthly active users (MAU) below its own estimates, indicating that the company’s decision to prioritize profit over increased marketing spending has impacted its user growth. Despite a 19% increase in MAUs in the first quarter, Spotify fell short of its own guidance and analysts’ forecasts, with only 618 million active users. Additionally, the company’s forecast for current-quarter MAUs, at 631 million, also missed estimates, according to IBES data from LSEG.

Although premium subscribers, who contribute significantly to Spotify’s revenue, increased by 14% to 239 million, in line with estimates, the overall user numbers were lower than anticipated. Spotify has been focused on cost-cutting measures, including layoffs and reducing its marketing budget, as it aims to boost margins and profits.

The company’s efforts to improve profitability seem to be paying off, as gross margins rose to 27.6% in the quarter, up from 25.2% a year earlier. This increase was partly attributed to higher profits in Spotify’s podcast business, leading to the company’s gross profit crossing 1 billion euros in a quarter for the first time.

CEO Daniel Ek emphasized Spotify’s focus on monetization, stating, “We have talked about 2024 as the year of monetization and we are delivering on that ambition.” The company expects its gross margin to improve further to 28.1% in the current quarter.

Despite the lower-than-expected user numbers, Spotify’s quarterly revenue still saw a 20% increase to 3.64 billion euros ($3.89 billion), surpassing estimates of 3.61 billion euros. Furthermore, the company expects its current-quarter revenue to reach 3.8 billion euros, exceeding expectations of 3.76 billion euros.

The discrepancy in user numbers highlights Spotify’s strategy of prioritizing profit over user acquisition through promotions and marketing activities. As the company continues to focus on increasing margins and profitability, it remains to be seen how its user growth will be impacted in the long run.