Spotify Technology S.A. Releases Results for Fourth Quarter 2024

Rhea-AI Summary

Spotify (SPOT) reported strong Q4 2024 financial results, marking significant growth across key metrics. Monthly Active Users (MAUs) grew 12% year-over-year to 675 million, while Premium Subscribers increased 11% to 263 million. Total Revenue reached €4.2 billion, up 16% Y/Y, with Premium Revenue growing 17% and Ad-Supported Revenue up 7%.

The company achieved record profitability with Gross Margin at 32.2% (up 555 bps Y/Y) and Operating Income at €477 million (11.2% margin), contributing to its first full year of Operating Income at €1.4 billion. Free Cash Flow hit a record €877 million in Q4, bringing the full year 2024 total to €2.3 billion.

Notable achievements include paying out $10 billion in music industry royalties in 2024 and launching new initiatives like Uninterrupted Video Podcasts for Premium Subscribers. The company maintains strong liquidity with €7.5 billion in cash and investments.

Positive

• Record Q4 user growth with 35 million new MAUs and 11 million Premium Subscribers
• First full year of Operating Income profitability at €1.4 billion
• Record high Gross Margin of 32.2%, up 555 bps Y/Y
• Record Free Cash Flow of €877 million in Q4, €2.3 billion for full year 2024
• Premium Revenue growth of 17% Y/Y to €3,705 million
• Operating Expenses declined 16% Y/Y in Q4

Negative

• Ad-Supported Revenue showed slower growth at 7% Y/Y
• Softness in advertising pricing despite impression growth
• Social Charges increased to €96 million from €33 million in prior year

Insights

Financial Analyst

Spotify's Q4 2024 results represent a pivotal transformation in the company's financial trajectory, marked by several breakthrough achievements. The record 32.2% gross margin (up 555 basis points Y/Y) signals a fundamental shift in Spotify's business model efficiency, driven by higher-margin audiobooks and improved music economics. This margin expansion, combined with the €477 million quarterly operating income, demonstrates the company's successful transition from growth-at-all-costs to profitable scaling.

User metrics tell an equally compelling story. The addition of 35 million MAUs in Q4 - the largest Q4 growth in company history - and 11 million new Premium subscribers indicate Spotify's continued ability to expand its user base even in mature markets. This growth, coupled with a 5% Y/Y increase in Premium ARPU, suggests successful price optimization without sacrificing user acquisition.

The company's financial health is particularly evident in its cash generation capabilities. The €877 million quarterly Free Cash Flow and cumulative €4.3 billion FCF since 2016 have built a formidable €7.5 billion cash position. This financial strength provides significant strategic flexibility for future investments in content, technology and potential acquisitions.

The €10 billion in music industry royalty payments for 2024 represents both a milestone in creator compensation and Spotify's growing influence in the music economy. The expansion of Spotify for Creators and the new Partner Program indicate a strategic push to diversify revenue streams and strengthen creator relationships, potentially creating new monetization opportunities beyond traditional streaming.

NEW YORK--(BUSINESS WIRE)-- Spotify Technology S.A. (NYSE: SPOT) has released its financial results for the fourth quarter of 2024 today. Please visit investors.spotify.com to view the Shareholder Deck and other supplemental materials.

As previously announced, the company will host a live question and answer session to discuss fourth quarter 2024 results at 8:00 a.m. Eastern Time. The session will be led by Daniel Ek, our Co-Founder and Chief Executive Officer, and Christian Luiga, our Chief Financial Officer. Questions can be submitted by going to slido.com and using the code #SpotifyEarningsQ424.

What: Spotify Fourth Quarter 2024 Financial Results Q&A Webcast
When: Tuesday, February 4, 2025
Time: 8:00 a.m. Eastern Time
Q4 2024 Update: https://investors.spotify.com/
Webcast: https://app.webinar.net/QeNdKX9RlwM
Slido Event Code: #SpotifyEarningsQ424

A live webcast of the earnings call will be accessible at investors.spotify.com and a recording of the webcast will be available following the session.

Key Highlights

Record net additions drive double digit Y/Y growth in MAUs and Subscribers

• MAUs grew 12% Y/Y to 675 million, reflecting Y/Y and Q/Q growth across all regions; net additions of 35 million marked the largest Q4 in our history
• Premium Subscribers grew 11% Y/Y to 263 million, reflecting Y/Y and Q/Q growth across all regions; net additions of 11 million matched Q4’19’s record performance

Continued top-line strength drives first full year of Operating Income profitability

• Total Revenue grew 16% Y/Y to €4.2 billion; on a constant currency* basis, Total Revenue grew 17% Y/Y
• Gross Margin finished at a record high of 32.2% (up 555 bps Y/Y)
• Operating Income finished at a record high of €477 million (an 11.2% margin), driving Spotify’s first full year of Operating Income to €1.4 billion
• Free Cash Flow* finished at record high €877 million, bringing full year 2024 Free Cash Flow generation to €2.3 billion

Largest ever Wrapped, expanding video experience and record music payouts

• 10th annual Wrapped campaign delivered double-digit Y/Y growth in user engagement across 184 markets
• Unveiled Uninterrupted Video Podcasts for Premium Subscribers in select markets, giving fans a new way to experience video podcasts
• Evolved Spotify for Podcasters into Spotify for Creators and introduced Spotify Partner Program to create new monetization opportunities for creators
• Paid out a record $10 billion in royalties to the music industry in 2024

Financial Summary

Revenue

Revenue of €4,242 million grew 16% Y/Y in Q4 (or 17% Y/Y constant currency*), reflecting:

• Premium Revenue growth of 17% Y/Y (or 19% Y/Y constant currency*), driven by subscriber gains and ARPU increases; and
• Ad-Supported Revenue growth of 7% Y/Y (or 6% Y/Y constant currency*)
• Unfavorable currency movements slowed Total Revenue Y/Y growth by ~160 bps vs. guidance for ~350 bps

Profitability

Gross Margin was 32.2% in Q4, up 555 bps Y/Y reflecting:

• Premium gains driven by audiobooks and music; and
• Ad-Supported gains driven by music and podcasts (partially offset by real estate impairment activity); and
• Other Costs of Revenue favorability, which benefited both the Premium and Ad-Supported segments

Operating Income was €477 million in Q4 and reflected:

• Lower personnel and related costs and lower marketing spend, partially offset by €96 million in Social Charges

At the end of Q4, our workforce consisted of 7,261 full-time employees globally

Free Cash Flow & Liquidity

Free Cash Flow* was €877 million in Q4. Our liquidity and balance sheet remained strong, with €7.5 billion in cash and cash equivalents, restricted cash and short term investments.

Revenue

Premium growth driven by Subscriber and ARPU gains

Premium Revenue grew 17% Y/Y to €3,705 million (or 19% Y/Y constant currency*), reflecting subscriber growth of 11% Y/Y and a Premium ARPU increase of 5% Y/Y to €4.85 (or up 7% Y/Y constant currency*). Excluding the impact of FX, ARPU performance was driven by price increase benefits, partially offset by product/market mix.

Advertising growth in challenging brand environment

Ad-Supported Revenue grew 7% Y/Y (or 6% Y/Y constant currency*), reflecting Y/Y growth across all regions. Both Music and Podcast advertising was driven by growth in impressions sold, partially offset by softness in pricing. Our automated sales channels were the largest contributors to overall advertising growth.

Operating Expenses

Y/Y declines led by efficiency initiatives

Operating Expenses declined 16% Y/Y in Q4. Currency movements and changes in Social Charge movements elevated Y/Y Operating Expense growth by ~200 bps and ~700 bps, respectively, while the lapping of prior year efficiency charges contributed ~1,300 bps of Operating Expense decline. Absent these items, the remaining 11% Y/Y decline in Operating Expenses was driven primarily by a decrease in personnel and related costs and lower marketing spend.

As a reminder, Social Charges are payroll taxes associated with employee salaries and benefits in select countries where we operate. Since a portion of these taxes is tied to the intrinsic value of share-based compensation awards, movements in our stock price can lead to fluctuations in the taxes we accrue. This resulted in Social Charges related to share-based compensation of €96 million in the current period. Prior year period Operating Expenses included €33 million in Social Charges.

Free Cash Flow

Record performance aids balance sheet strength

Free Cash Flow* was €877 million in Q4, a record high as a result of higher Net Income adjusted for non-cash items and a positive contribution from net working capital. Capital expenditures rose €5 million Y/Y to €6 million.

While the magnitude of Free Cash Flow can fluctuate from quarter to quarter based on seasonality and timing, we have averaged €661 million of positive Free Cash Flow on a trailing 12 month basis for the past three years. In Q4, trailing 12 month Free Cash Flow expanded to €2.3 billion. On a cumulative basis, we have generated €4.3 billion of Free Cash Flow since the beginning of 2016, supporting our strong balance sheet and €7.5 billion in cash and cash equivalents, restricted cash and short term investments balance.

About Spotify Technology S.A.

Spotify’s platform revolutionized music listening forever when we launched in 2008. Today, more listeners than ever can discover, manage and enjoy over 100 million tracks, more than 6.5 million podcasts titles, and 350,000 audiobooks a la carte on Spotify. We are the world’s most popular audio streaming subscription service with more than 675 million users, including 263 million subscribers across 184 markets.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250204709105/en/

Investor Relations:

Bryan Goldberg

ir@spotify.com

investors.spotify.com



Public Relations:

Dustee Jenkins

press@spotify.com

Source: Spotify Technology S.A.

FAQ

What was Spotify's (SPOT) revenue growth in Q4 2024?

Spotify's total revenue grew 16% year-over-year to €4.2 billion in Q4 2024, with Premium Revenue up 17% and Ad-Supported Revenue up 7%.

How many Premium Subscribers did Spotify (SPOT) gain in Q4 2024?

Spotify added 11 million Premium Subscribers in Q4 2024, matching their previous record from Q4 2019, reaching a total of 263 million subscribers.

What was Spotify's (SPOT) Free Cash Flow in 2024?

Spotify generated €2.3 billion in Free Cash Flow for the full year 2024, with a record €877 million in Q4 alone.

How much did Spotify (SPOT) pay in music royalties in 2024?

Spotify paid out a record $10 billion in royalties to the music industry in 2024.

What was Spotify's (SPOT) Operating Income for Q4 2024?

Spotify's Operating Income reached a record high of €477 million in Q4 2024, representing an 11.2% margin.