Spotify Technology (SPOT) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 2024 profitability with all KPIs meeting or exceeding guidance, including strong subscriber and MAU growth, and revenues up 19% year-over-year to €3,988 million.

• Net additions included 14 million MAUs and 6 million Premium subscribers, both above guidance, with Premium Subscribers reaching 252 million and MAUs at 640 million.

• Free Cash Flow reached a record €711 million in Q3, with trailing 12-month FCF at €1.8 billion and cash and equivalents at €6.1 billion.

• Strategic focus on balancing growth and profitability, with continued investment in audiobooks, video, and new subscription tiers, and global expansion of features like AI DJ and music videos.

• Leadership transition with the appointment of Christian Luiga as CFO, and operating expenses declined 8% year-over-year due to efficiency measures.

Financial highlights

• Total revenue was €3,988 million, up 19% year-over-year (21% constant currency), with Premium revenue at €3,516 million (+21%) and Ad-Supported revenue at €472 million (+6%).

• Gross profit reached €1,240 million, with gross margin at a record 31.1% (up 473 bps year-over-year).

• Operating income was €454 million (11.4% margin), including €54 million in social charges due to share price appreciation.

• Net income for Q3 2024 was €300 million, with EPS of €1.49 basic and €1.45 diluted.

• Free Cash Flow for Q3 was €711 million, with cash and equivalents plus short-term investments totaling €6.1 billion.

Outlook and guidance

• Q4 2024 guidance: 665 million MAUs (+25 million), 260 million Premium subscribers (+8 million), and total revenue of €4.1 billion.

• Gross margin expected at 31.8%, operating income at €481 million, and first full year of positive operating income at €1.4 billion.

• FX headwinds impacted Q3 and Q4 outlook by approximately €80 million, with guidance assuming ~350 bps FX headwind to revenue growth year-over-year.

• ARPU growth to moderate by ~400 basis points year-over-year in Q4 due to lapping 2023 price increases.

• Management will monitor macroeconomic conditions, including inflation and geopolitical risks, and adjust as needed.