Spotify reports record quarterly profits amid cost cuts and layoffs

Spotify has reported record-breaking gross profits exceeding €1bn (£860m) following a year defined by cost-cutting measures and staff reductions.

The Swedish streaming giant, which recently announced it's set to raise its premium prices at the end of this month, now offers a wide range of podcasts and audiobooks to subscribers, further securing its foothold in the streaming industry.

Music Week reports that Spotify's total revenue increased by 21% on a “constant currency basis” to €3.6 billion, quoting the company as saying their performance was a “solid start to the year as monetisation and efficiency take centre stage”.

The Music Week piece quoted Spotify founder and CEO Daniel Ek: “We’ve talked about 2024 as the year of monetisation and we’re delivering on that ambition. Now as we’ve shifted to focus on strong revenue growth and margin expansion, we see a clear opportunity to ensure we are also continuing to grow the top of our funnel. I feel good about the changes we are implementing and remain very confident in our ability to reach the ambitious plans we’ve outlined."

While quarterly gross profits soared, Spotify fell short of its forecast for monthly active users, prompting a 17% reduction in its workforce in 2023 as part of a cost-control initiative.

According to a report by BBC, Ek's action signalled Spotify's commitment to global expansion and the ambition to reach a billion users by 2030.

"We are going to add back some marketing spend over the year," said Ek on the plan. "Because we want to keep on having the growth and we saw that in some territories, we may have pulled back a little bit too much."

The surge in profits is largely attributed to Spotify's flourishing podcast division, with gross margins climbing to 27.6% in the quarter, fuelled by strategic investments exceeding a billion euros, including lucrative deals for hit programs

While quarterly revenue surged by 20% to €3.64bn, outpacing estimates, Spotify's user growth slightly lagged behind projections, with 615 million users compared to the anticipated 618 million. However, premium subscribers witnessed a 14% increase in the first quarter, reaching 239 million, in line with forecasts.

The news comes three weeks after officially demonetised all tracks with under 1,000 streams. The new policy came into effect for all artists earlier this month

Last December, Spotify announced that its chief financial officer, Paul Vogel, was leaving the company after he cashed in $9.3 million (£7.4 million) in shares