Spotify beats subscriber, margin estimates even as ad sales lag

SPOTIFY Technology reported third-quarter growth in subscribers and profit margins, saying lower marketing and personnel costs helped the music streaming service overcome a tough climate for advertising.

Paying subscribers grew to 252 million, the Stockholm-based company said on Tuesday (Nov 12), beating analysts’ estimates of 250.1 million. Total monthly active users increased to 640 million, also exceeding estimates.

The company is showing the benefits of workforce cuts taken late last year, along with the tailwind from continued growth. Its gross margin, a measure of profitability, widened to 31.1 per cent, topping Wall Street expectations, and its operating income surged to 454 million euros (S$645 million).

Revenue for the quarter increased 19 per cent to 3.99 billion euros, missing the 4.03 billion euros average of analysts’ estimates. Advertising revenue increased 6 per cent, held back by low prices in its music business and podcasts.

Shares of Spotify rose more than 9 per cent to US$457.79 in extended trading after the results were announced. They have more than doubled this year, reflecting investor confidence in the company’s ability to grow, raise prices and increase earnings. BLOOMBERG