Spotify turned in strong numbers for the second quarter, beating expectations for total and paid subscriber adds and reporting 23% revenue growth.
Premium subscribers grew 14% to 188 million, a net gain of 6 million (and 1 million above guidance), “aided by promotional intake and household plans,” the company said in announcing results. That included a loss of about 600,000 subs in Russia, after Spotify fully exited the country in early April.
Total monthly active users grew 19% to 433 million, an adjusted net gain of 19 million in Q2 and 5 million above guidance — Spotify’s largest-ever Q2 growth. The company attributed the gains to reactivations in Europe, “Gen Z strength in Latin America” and marketing campaigns across the globe outside its core regions.
Total revenue was €2.86 billion, up 23%. Spotify reported a net loss of €125 million for the period, versus a net loss of €20 million in the year-earlier period.
“While we continue to monitor the uncertain macroenvironment, we are very pleased with the resilience of the business, particularly our strength in MAUs and subscribers,” Spotify said in the Q2 shareholder presentation.
Shares of Spotify popped more than 15% in early trading on the results, while the stock is still down more than 50% year to date.
Spotify’s ad-supported revenue jumped 31% to €360 million, reaching an all-time high as a percentage of total revenue at 13%. Subscription revenue increased 22% to €2.50 billion, with average revenue per sub increasing 6% year-over-year to €4.54 (excluding foreign-exchange rates).
Spotify’s previous Q2 guidance was to hit 428 million monthly users and 187 million paying subs, with revenue of €2.80 billion and a net loss of €197 million.
In the second quarter, Spotify’s gross margin was 24.6%, compared with 28.4% in Q2 2021. For the most recent quarter, that was hurt by the decision to stop manufacturing Car Thing, Spotify’s device for connecting smartphones to car entertainment systems. That resulted in a €31 million one-time charge.
Even with the better-than-expected Q2 results, in a June 15 memo, Spotify chief Daniel Ek told staffers the company was trimming hiring plans by 25% amid broader economic uncertainty.
For Q3, Spotify projected total monthly active users reaching 450 million and Premium subscribers growing to 194 million. The company guided Q3 revenue to €3.0 billion with an operating loss of €218 million.
At the end of Q2, Spotify had 4.4 million podcasts on the platform. The number of monthly users who engaged with podcasts grew in the “substantial double digits” year over year, the company said. Spotify released 100 new original and exclusive podcasts globally in Q2, including DC/Warner Bros.’s “Batman Unburied,” a breakout hit that reached No. 1 in several markets.
By 2030, Spotify expects to top 1 billion users worldwide, more than double its current count, company execs said at its investors day event last month. It also revealed that Spotify’s podcast business generated nearly €200 million in revenue in 2021, with a negative gross margin of -57%. The podcast losses will be even higher this year, peaking in 2022, according to CFO Paul Vogel; in the next five years, Spotify sees the podcast business turning a profit with gross margins of 40%-50%.
Meanwhile, earlier this month, Spotify announced the acquisition of music-trivia game Heardle, modeled on the popular Wordle game (bought by the New York Times Co.). Spotify didn’t disclose the price tag.