Spotify tops €1b profit for the first time
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The news: Spotify's quarterly gross profit has topped €1 billion ($1.65 billion) for the first time after the music streaming giant reined in marketing spending, sending its shares higher.
The numbers: March quarter revenue rose 20% to €3.64 billion, beating estimates of €3.61 billion, while gross margins rose to 27.6% from 25.2% a year earlier.
However, the curb on marketing spend resulted in monthly active users (MAUs) rising 19% to 615 million, missed Spotify's own guidance and analysts' median estimate of 618 million.
The New York-listed shares in the company jumped 11% to USD303.31 ($467.49).
The context: The Swedish company has been growing its user base for years by offering promotions and investing in podcasts and audiobooks. But since last year it started to cut costs, including through layoffs and its marketing budget, to boost margins and profits.
Spotify has invested over €1 billion to build up its podcast business, while also raising prices to boost revenue and experimenting with different subscription plans. The company forecast 631 million monthly active users for the second quarter, below analysts' estimate.
What they said: "We are going to add back some marketing spend over the year," Spotify CEO Daniel Ek said. "Because we want to keep on having the growth and we saw that in some territories, we may have pulled back a little bit too much."
