Spotify Technology (SPOT) Q2 2024 earnings summary

Executive summary

• Achieved strong Q2 performance with record free cash flow, three consecutive quarters of profitability, and subscriber net additions of 7 million, exceeding guidance by 1 million.

• Revenue grew 21% year-over-year on a constant currency basis to €3.8 billion, with gross margin reaching a Q2 record of 29.2%, up 510 bps year-over-year.

• Premium Subscribers reached 246 million, up 12% year-over-year; total MAUs hit 626 million, up 14%, though MAU growth lagged in developing markets.

• Monetization efforts and diversified subscription plans, including new Audiobooks Access and Basic tiers, reduced reliance on free-to-paid conversion.

• Net income was €274 million, compared to a net loss of €302 million in Q2 2023.

Financial highlights

• Total revenue grew 21% year-over-year to €3.8 billion; premium revenue up 21% and ad-supported revenue up 13%.

• Gross margin at 29.2% (up 510 bps year-over-year); premium gross margin 31.4%, ad-supported gross margin 13.4%.

• Operating income was €266 million, with free cash flow at a record €490 million for Q2 and €697 million for the first half of 2024.

• Net income was €274 million, with basic EPS of €1.37 and diluted EPS of €1.33.

• Cash and cash equivalents plus short-term investments totaled €5.4 billion as of June 30, 2024.

Outlook and guidance

• Q3 2024 guidance: 639 million MAUs (+13 million), 251 million premium subscribers (+5 million), €4 billion revenue, 30.2% gross margin, and €405 million operating income.

• Sequential improvement in ARPU growth and continued gross margin and operating income expansion expected through 2024.

• Guidance incorporates €15 million in Social Charges, with sensitivity to share price movements.

• Management expects continued growth in Premium Subscribers and MAUs, supported by marketing and product enhancements.

• The company will monitor macroeconomic uncertainty, including inflation and geopolitical risks.