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Music streaming giant Spotify ended the second quarter of 2022 with 188 million premium, or paying, subscribers, up from 182 million as of the end of the first quarter, exceeding its own forecast.
The company said the result came in “above our guidance, aided by promotional intake and household plans.”
Spotify also said on Wednesday that it hit better-than-expected 433 million monthly active users (MAUs) as of the end of June, up from 422 million as of the end of March. “Net additions of 19 million represented our largest ever second-quarter growth,” the firm said, citing such factors as reactivations in Europe and what it described as “Gen Z strength in Latin America.”
The company, led by CEO Daniel Ek, had previously forecast it would end the quarter through June with 187 million paying subscribers, assuming “additional 600,000 disconnects from full closure of Russian operations in April,” and 428 million monthly active users, reflecting “a loss from the closure of Russian operations.” The guidance marked a switch to providing single estimates for key metrics instead of the forecast ranges that it had previously shared with investors and Wall Street analysts.
Second-quarter advertising revenue at the Stockholm-based company continued to grow despite slowing ad momentum at some digital giants amid fears of a recession. Spotify’s quarterly ad haul jumped 31 percent to €360 million ($365 million), “reaching an all-time high as a percent of total revenue at 13 percent.”
Advertising growth drove a total second-quarter revenue gain of 23 percent to €2.86 billion ($2.90 billion). Spotify reported a quarterly operating loss of €194 million ($197 million) and a net loss of €125 million ($127 million).
The music streamer’s podcast business also continued to expand. At the end of June, Spotify had 4.4 million podcasts on the platform, up from 4.0 million at the end of March. Podcast revenue grew in the “strong double-digit range” over the year-ago period, the company said. “We released 100 new original and exclusive podcasts globally in the second quarter, with Batman Unburied hitting #1 in several key markets. Additionally, video podcasts are now available to creators via Anchor in 11 markets.”
Even as Spotify’s global subscriber growth exceeded expectations, CEO Ek told analysts during a morning call that even the company couldn’t escape the impact of the current economic slowdown as it tracked consumer spending. “While the macro environment continues to present uncertainty, we’re currently not seeing any material impact on our expectations for users or sub growth from the economic downturn. In fact, we’re seeing several markets trending ahead of our forecasts,” he insisted.
But Spotify is preparing for rougher waters, which includes reducing the pace of hiring by 25 percent. “I do believe only the prepared survive, and we’re preparing as if things could get worse,” Ek added.
Spotify’s stock jumped more than 9 percent in pre-market trading on Wednesday.
Despite multiple references to market uncertainty, Spotify execs emphasized they would continue to drive overall user growth, including for its free offering, as well as usage and engagement. That includes podcasting, which remains a growth business for Spotify.
“One of the more unique qualities around audio is how it’s differently shaded than other media… I believe audio is the primary beneficiary of that,” Ek said of consumers in cars or outdoors with earphones becoming audiences for advertisers, or users in homes listening to more podcasts and audiobooks.
In new product categories, Spotify recently closed a deal to acquire Findaway, a digital audiobook distributor, and is also dipping its toe in political advertising. “Political is new for us, we’re doing it in a targeted, smaller way,” Spotify CFO Paul Vogel told the morning call.
Spotify execs also talked about their newly-inked partnership with FC Barcelona in the Spanish soccer league, where the audio streaming platform will become the main partner for the global soccer club and its official audio streaming partner.
“Our data would suggest Barcelona as a club reaches over 700 million unique people per year, many of them in Latin America and emerging markets, places where our next phase of growth will be,” Vogel said.
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