Spotify's efforts to boost its premium subscriptions are paying off, literally.
The streaming giant recently revealed record profits in its second-quarter earnings presentation and now its stock is surging. Shares soared at a rate of 14% on the New York Stock Exchange on Tuesday, according to The music business around the world.
Spotify has reportedly revealed a 20% increase in revenue to a staggering $4.14 billion between April and June, with gross margins of 29.2%. But how does Spotify manage to generate so much revenue?
Premium subscriptions are generating huge revenue. The company saw a 12% increase in its subscriber base despite a couple of price hikes, bringing the total number of users to a staggering 246 million. These premium subscriptions increased the company’s revenue by 21%. Spotify’s advertising business has also proven successful, driving a 13% increase in sales to over $456 million.
Another major factor contributing to the company’s revenue surge in the second quarter was the layoffs and budget cuts it made at the end of 2023. In December, Spotify reportedly reduced its workforce by 17% by laying off around 1,500 employees. Its operating costs were reduced by 16% year-over-year, which not only affected its workforce but also its massive marketing budget.
“It's an exciting time at Spotify,” CEO Daniel Ek said in a statement. Spotify Blog Post“We continue to innovate and prove that we are not only a great product, but also, increasingly, a great company. We are doing it in a timeframe that has exceeded even our own expectations. All of this bodes well for the future.”
Spotify expects to add 13 million additional users in the third quarter and five million more premium subscribers with the launch of its basic plan in Great Britain and Australia and the expansion of its video catalogue. In addition, the company expects to make more than 4 billion dollars in revenue between July and September.
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