Spotify has announced its first-quarter earnings report for 2023, revealing that its user base grew by 26 million users in Q1. This has resulted in the first time the company has surpassed 500 million users, reaching a total of 515 million active users worldwide.
Spotify saw a growth of 5% from the previous quarter and 22% from the same period last year, marking its second-highest quarter for user growth to date. The company expressed surprise as the growth was 15 million more than expected, noting that it witnessed growth in almost every age group and market, including both developed and developing markets.
The majority of this growth came from users who utilize the free, ad-supported version of the service. The premium subscription user base rose by 2% from the previous quarter, and 15% year over year, reaching 210 million. However, this did not keep pace with overall growth, with the ad-supported side dropping 27% in revenue from €449 million ($494 million) to €329 million ($362 million), a four percent dip from the previous quarter.
Spotify posted a net operating loss of €156 million ($172 million) for the quarter, significantly higher than the €6 million ($6.6 million) loss it saw in Q1 2022. Nonetheless, this loss represents an improvement over the previous quarter’s €270 million ($297 million) loss. Meanwhile, revenue was up by 14% year over year, from €2.66 billion ($2.93 billion) to €3.04 billion ($3.34 billion) but decreased by four percent from the previous quarter.
To control costs, Spotify, like many other significant tech companies in recent months, has laid off a sizable proportion of its staff. The company laid off around 600 people, or 6% of its workforce, in January 2023, based on the 9,800 employees at the end of 2022. Additionally, Spotify has plans to shut down its live audio app, Spotify Live, and the Wordle-style song-guessing game it purchased last summer, Heardle.
Spotify’s Q1 2023 earnings report has shown impressive user growth and revenue increases, despite a significant net operating loss. While there were challenges with revenue generation from advertisers, the company remains optimistic about its future prospects. As it continues to focus on its core business, it will be interesting to see how the company responds to the ever-changing audio streaming landscape.
Spotify’s CEO, Daniel Ek, stated that the company’s focus is on enhancing its podcast offerings and expanding its content catalog, among other things. The company recently acquired podcast companies such as Megaphone and Anchor and also secured exclusive deals with podcast creators, including Joe Rogan and Michelle Obama.
In a statement, Ek said that Spotify is “focused on expanding its global footprint” and plans to achieve this by “increasing its content offerings and improving user engagement.” He added that the company is investing in a wide range of initiatives to achieve this, including personalization and discovery, content creation, and partnerships with artists and other companies.
Despite the net operating loss, Spotify‘s strong user growth is an indication that the company is well-positioned to compete in the highly competitive audio streaming industry. The company’s ability to adapt to changing market conditions and consumer preferences will be critical to its future success.
Overall, Spotify’s Q1 2023 earnings report highlights the company’s continued growth and its strong position in the audio streaming industry. While there are challenges, such as the dip in revenue from advertisers and the net operating loss, the company remains optimistic about its future prospects.
As it continues to focus on its core business and expand its content offerings, Spotify is well-positioned to maintain its status as one of the leading audio streaming platforms in the world.