Spotify’s quarterly gross profit Curbing marketing spending helped it top $1.1 billion for the first time, but it also means the music streaming giant missed its monthly active user forecasts.
The Swedish company has grown its user base over the years by offering promotions and investing in podcasts and audiobooks.
But since last year, the company has begun cutting costs, including layoffs and marketing budgets, to increase margins and profits.
Spotify stock initially fell following the quarterly results, but reversed and rose 8% in pre-market trading on Tuesday.
CEO Daniel Ek said in an interview: “We’re planning to add some marketing spending later this year.” “We want to continue to grow and we realized that in some areas we may have stepped back a little bit too much.”
Gross profit margin for the quarter rose to 27.6% from 25.2% in the same period last year, due in part to profits from the podcast business.
Spotify has invested more than $1 billion to build its podcast business, including hundreds of millions of dollars on popular shows like “The Joe Rogan Experience.”
“(Podcasting) was tough last year. Now it’s another profit center for us,” Ek said.
The company’s quarterly sales rose 20% to $3.9 billion.
Spotify is raising prices and experimenting with different subscription plans to increase revenue.
“We’re also adding a music-only tier for consumers who only care about the music side,” Ek said.
Monthly active users (MAUs) rose 19% to $658 million in the first quarter, falling short of Spotify’s own guidance and analysts’ median estimate of $661 million.
The company expects second-quarter MAUs of $675 million, lower than analysts’ expectations of $680 million, according to IBES data from LSEG.
The company also predicted that its gross profit margin for the current quarter would rise to 28.1%.
Premium subscribers increased 14% to $255 million in the first quarter, matching expectations.
