Spotify Hit 300 Million Premium Subscribers in Q2

Spotify has reported subscriber, revenue and profit growth in its Q2 financial results, reaching 300 million Premium subscribers for the first time while exceeding guidance on paid additions and posting record profitability.

Q2 subscriber growth:

• Premium subscribers rose to 300 million, up 7 million QoQ and ahead of guidance by 1 million.

• Spotify attributed growth to YoY and QoQ gains across all regions and “strong global promotional campaign intake.”

• Europe accounted for 36% of its total Premium subscriber base in Q2, North America 25%, Latin America 24%, and Rest of World 15%.

• Monthly Active Users (MAUs) increased 12% YoY to 777 million, up 16 million QoQ, although this was 1 million below guidance.

Revenue performance:

• Total revenue grew 14% YoY to €4.777 billion ($5.56bn).

• Premium revenue increased 16% YoY (constant currency) to €4.331 billion ($5.04bn), driven by subscriber growth and higher ARPU.

• Premium monthly ARPU reached €4.89 ($5.69), up 7.4% YoY (constant currency), reflecting the benefit of price increases, partly offset by product and market mix.

• Ad-supported revenue rose 3% YoY (constant currency) to €446 million ($519m), with music advertising benefiting from higher impressions sold despite softer pricing.

Margins and profit:

• Operating income climbed 61% YoY to €655 million ($762m), beating guidance thanks to higher gross margin and lower-than-expected social charges.

• Gross margin reached a record 33.4%.

• Spotify reported Q2 net income of €545 million ($634m), compared with an €86 million loss a year earlier, while free cash flow reached €797 million ($927m), a record for a second quarter.

Q3 outlook:

• Spotify expects to reach 305 million Premium subscribers and 788 million MAUs by the end of Q3.

What they said:

• Alex Norström, Co-CEO: “We have a scale that few companies in history have reached, a business that is healthy and compounding, and opportunities only we are positioned to pursue. Spotify lives across your whole day — the commute, the workout, studying, gaming, the dinner table, and sleep. At our scale, that is rare…Our position gives us an opportunity space as wide as our users want it to be.”