Spotify Q4 Earnings Beat Expectations, Show Strong Subscriber Growth

Key Points:

* Spotify reported Q4 earnings that exceeded revenue estimates.
* The company posted its first full-year profit.
* Monthly active users (MAUs) reached 675 million, surpassing analysts' expectations.
* Spotify's stock rose in pre-market trading by approximately 8%.

Financial Performance:

* Q4 revenue: Beat expectations
* Q4 net income: €367 million (or €1.76 per share)
* Gross margins: Record high of 32.2%
* FY2024 gross margin target: 30-35%

Subscriber Growth:

* MAUs increased by 35 million to 675 million.
* Q1 2025 MAU guidance: 678 million

Business Developments:

* Business overhaul strategy includes layoffs and a shift away from podcasts.
* Introduction of higher-priced audio bundles and audiobooks-only plans.
* New multiyear distribution agreement with Universal Music Group (UMG).

Analyst Outlook:

* Gross margin expansion expected to slow in 2025.
* Catalysts include price hikes and new tiers for superfans.
* Most analysts maintain a positive outlook on Spotify, with a median price target of $517.

Conclusion:

Spotify's strong Q4 performance reflects its successful execution of its efficiency strategy. The company's expanding subscriber base and improving financial position position it well for continued growth in the future.