Financial Performance

Spotify Shares Gain 14% on Surprise Q3 Profit

The quarter also beat the company's expectations for subscriber growth, gross margins and operating profit.
Matthew HellerOctober 28, 2019

Federica Tremolada at a Spotify photocall

Spotify shares jumped on Monday after the music-streaming service reported a surprise quarterly report and strong subscriber growth despite intense competition.

For the third quarter, Spotify earned $0.41 per share, versus analysts’ estimates of a loss of $0.40 per share. It has now beaten estimates in three of the last four quarters.

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Revenue increased 28% to $1.92 billion while Spotify added 5 million new paying subscribers in the third quarter, ending the quarter with 113 million premium subscribers, up 31%. It had forecast adding 4 million subscribers, based on the midpoint of its guidance.

“We continue to feel very good about our competitive position in the market,” the company said in a news release. “Relative to Apple, the publicly available data shows that we are adding roughly twice as many subscribers per month as they are. Additionally, we believe that our monthly engagement is roughly [twice] as high and our churn is at half the rate.”

Spotify also said it continues to add more users on an absolute basis than Amazon’s music-stream offering. “The business met or exceeded our expectations in 3Q19, with accelerating MAU [monthly active user] growth, and better than expected subscriber growth, gross margins and operating profit,” it said.

In trading Monday, Spotify shares rose 14.8% to $138.14 as the company also reported 248 million total monthly active users in the third quarter, up 7% from the previous quarter and up 30% year over year.

It expects to add 9.5 million paying subscribers in the fourth quarter, based on the midpoint of its guidance, and from 255 million to 270 million monthly active users worldwide.

“Spotify is maintaining its lead in a competitive market,” Investor’s Business Daily said.

According to the earnings release, Spotify has been seeing “exponential growth in podcast hours streamed,” with a 39% gain in the third quarter and podcast adoption reaching almost 14% of total MAUs.

“The U.S. accounts for the largest share of podcast streams but share of listening is higher and growing faster in several European countries,” Spotify said. “Podcast engagement is clearly a growing global phenomenon.”

At the same time it announced earnings, Spotify said its chief financial officer, Barry McCarthy, would be retiring from the company on January 15, 2020. He will be replaced by Paul Vogel, who is Spotify’s vice president of financial planning and analysis, treasury, and investor relations.

McCarthy joined Spotify in June 2015 and oversaw the company’s direct stock market listing.

Photo by Samuel de Roman/WireImage