Spotify Q4 Earnings Beat: MAUs Surge, First Full-Year Profit Recorded

Spotify Technology (SPOT) reported strong fiscal fourth-quarter results on Tuesday, exceeding revenue expectations and posting its maiden full-year profit. The audio streaming giant witnessed a robust increase in subscriber growth, defying concerns over recent price hikes.

Key Metrics

* Monthly active users (MAUs) soared by 35 million to reach 675 million, surpassing estimates of 665 million.
* Spotify guided to Q1 MAUs of 678 million, also exceeding projections.
* Q4 profit surged to 367 million euros ($1.82 per share), reversing the previous year's loss of 70 million euros.

Financial Highlights

* Revenue set a quarterly record, exceeding expectations.
* Gross margins jumped to 32.2%, a record high, reflecting the company's "efficiency" strategy.
* Operating income and free cash flow also reached quarterly record highs.

Management Outlook

Spotify CEO Daniel Ek expressed optimism for 2025, calling it "the year of accelerated execution." He emphasized the company's plans to enhance product innovation, particularly in music, while remaining disciplined in its approach.

Stock Surge

Spotify shares surged around 10% in early trading, extending a remarkable rally over the past year that has seen the stock soar to all-time highs, up approximately 170%.

Analysts' Reactions

"Spotify's execution continues to improve," said JPMorgan analyst Doug Anmuth. "The company enters 2025 with accelerating MAU growth, product enhancements, and the ability to drive higher margins."

Analysts cautioned that margin expansion may slow in 2025 after a significant increase in 2024. However, they highlighted potential catalysts, including future price hikes and tiered subscription plans.

Business Overhaul

Spotify's resurgence follows a strategic overhaul, including layoffs, executive changes, and a shift away from podcast investments. These efforts have helped the company recover from record lows in 2022.

Universal Music Group Deal

Spotify recently signed a multiyear agreement with Universal Music Group. The deal's financial terms are undisclosed, but analysts suggest it may have eliminated Spotify's bundle discount on US mechanical royalties. Despite potential cost implications, Spotify believes the deal will drive growth and scale.