Spotify Q4 Earnings Preview: Subscriber Growth and Margin Expansion Expected

Revenue and Earnings Expectations

Spotify (SPOT) is scheduled to report its fiscal fourth quarter 2023 results on Tuesday before the market opens. Analysts are estimating revenue of €4.16 billion, an increase from €3.67 billion in Q4 2023. Adjusted earnings per share are projected at €1.89, compared to an adjusted loss of €0.36 in Q4 2023.

User Growth Metrics

Wall Street anticipates a steady increase in Spotify's monthly active users (MAUs) to 665 million from 602 million in the previous quarter. Premium subscribers are also expected to grow to 260 million, up from 236 million.

Gross Margin Expansion

Spotify has made significant progress in improving its profitability. In the most recent quarter, its gross margin increased to 31.1% from 26.4% in the prior year. Analysts expect further margin expansion to 31.8% in Q4.

Growth Catalysts

Several growth drivers are expected to contribute to Spotify's continued success:

* Price increases
* Introduction of new premium tiers
* Expansion of its advertising ecosystem
* Monetization of audiobooks and podcasts

New Distribution Agreement with Universal Music Group

Spotify recently announced a multiyear distribution agreement with Universal Music Group (UMG.AS), providing access to upcoming releases and exclusive products. The financial terms of the deal remain unclear, but it is expected to impact Spotify's economic profile.

Analyst Outlook

The consensus price target for Spotify among Wall Street analysts is around $517 per share, with a median Buy rating and a price target range of $420 to $555.

Conclusion

Spotify is set to deliver another strong quarter driven by continued subscriber growth and margin expansion. The upcoming earnings report will shed light on the company's post-pandemic recovery and future growth prospects.