SPOTIFY HITS 433M USERS IN STRONG Q2

Spotify had a better-than-expected Q2 this year as monthly average users (MAU) grew 19% to 433m, premium revenue was up 22% to €2.5b and advertising revenue spiked 31% over 2021.

Total revenue for the quarter was up 23% to €2.9b. It was the company's fourth consecutive quarter of growth.

The results pushed the stock up by more than 12% Wednesday, closing at $116.61.

The increase in MAU—5m above guidance—was driven by strong performance in India, Indonesia and the Philippines, plus higher reactivations in Europe. Net additions of 19m represented the company’s biggest-ever Q2 growth.

Spotify is now projecting an MAU total of 450m by 9/30, the end of Q3. Premium subs are expected to hit 194m; total revenue will reach €3b.

CEO Daniel Ek said Spotify teams have been focused on growing the user count over the last year and that “we’re pleased with the results.” The next step, he explained, is figuring out how to convert users into paying customers. Based on the company’s previous experience, they expect to see a spike in paying subscribers “roughly a year from now.”

Spotify’s gross margin dropped to 24.6% from 28.4%, owing to a decision to stop manufacturing Car Thing, a device that connects phones to car stereos. The company abandoned the project after a price point couldn't be determined, which was compounded by inflation and the lead time requited to obtain parts. Ek and co. expect gross margin to head back to 25.2% in Q3.

In their call with analysts, Spotify execs expressed pride in their slideshow presentation of the results, which you can access here.