Spotify Q3 User Growth In-Line to Hit 381 Million, Ad Revenue Jumps 75% With Growing Podcast Slate10/27/2021
Spotify posted double-digit gains for overall monthly users and paid subscribers for the third quarter of 2021, in line with expectations, while its advertising revenue — fueled by its growing podcast slate — outperformed with with a 75% year-over-year increase.
The company’s total monthly active users grew 19% year over year, to 381 million in Q3 (up from 365 million). Spotify Premium subscribers also climbed 19% to 172 million in the quarter, at the midpoint of the guidance range.
Click here to sign up for Variety’s free Media Earnings newsletter.
“We had a very strong quarter,” Spotify CEO and founder Daniel Ek said in prepared remarks. “The business is doing really well and I’m pleased that we continue to deliver across the areas that are fundamental to our growth and long-term strategy.”
Spotify’s previous guidance for Q3 was for total monthly users of 377 million-382 million and paid subscribers of 170 million-174 million.
The audio streamer posted revenue of €2,501 million ($2.90 billion), up 27%, at the top end of its guidance range. Subscription revenue grew 22% — while ad sales were particularly strong, growing 75% year-over-year to €323 million ($374 million).
Spotify eked out a net profit of €2 million ($2.3 million), translating to a net loss of -0.41 euros per diluted share. On average, Wall Street analysts had anticipated revenue of $2.84 billion and EPS of -21 cents.
The company’s Q3 gross margin was 26.7% in Q3, above expectations. That reflected a “favorable revenue mix shift” toward podcasts, marketplace activity, improved music advertising operating leverage, and cost efficiencies (like payment fees and streaming delivery costs). The improvement was partially offset by higher non-music and other content costs and publishing rate increases, Spotify said.
At the end of Q3, Spotify had 3.2 million podcasts on the platform (up from 2.9 million at the end of Q2). The company said the percentage of MAUs that engaged with podcast content continued to increase throughout the quarter, accelerating relative to Q2, but didn’t disclose numbers. Among users who engaged with podcasts in Q3, consumption was up 20% year-over-year on a per-user basis. During the quarter, podcast share of overall consumption hours on the platform also reached an all-time high (but Spotify didn’t say what that was).
Ad revenue “meaningfully outperformed,” according to Spotify, spanning all sales channels, with the U.S. and U.K. in particular delivering above expectations. The podcast ad business was driven by double-digit growth for content from Spotify studios (The Ringer, Parcast, Spotify Studios and Gimlet) along with the company’s Megaphone acquisition and the exclusive licensing deals for “The Joe Rogan Experience,” “Armchair Expert” with Dax Shephard, and Alex Cooper’s “Call Her Daddy.”
For Q4, Spotify maintained prior guidance for total MAUs of 400 million-407 million and paid subscribers of 177 million-181 million. The company increased the bottom end of the range for total revenue (to €2.54 billion-€2.68 billion) and and gross margin (now expected to be 25.1%-26.1%).
Source: Read Full Article