Spotify‘s efforts to grow their premium subscriptions are paying off, quite literally.
The streaming giant recently revealed record profits on its Q2 earnings call, and now, their stock is surging. Shares ballooned at a 14% clip on the New York Stock Exchange on Tuesday, per Music Business Worldwide.
Spotify reportedly revealed a 20% revenue increase to a staggering $4.14 billion from April to June, with gross margins of 29.2%. But how is Spotify driving so much revenue?
Premium subscriptions are bringing in the big bucks. The company saw a 12% increase in its subscriber base despite a pair of price hikes, bringing the number of total users to an astounding 246 million. These premium subscriptions swelled the company’s revenue by 21%. Spotify’s ad business has also proven successful, driving a 13% increase in sales to over $456 million.
Another major contributing factor to the company’s boosted Q2 revenue is their late-2023 layoffs and budget cuts. Back in December, Spotify reportedly reduced their workforce by 17% by letting go of roughly 1,500 employees. Their operating costs were cut by 16% year-on-year, which not only affected their workforce, but also their massive marketing budget.
“It’s an exciting time at Spotify,” said CEO Daniel Ek, per a Spotify blog post. “We keep on innovating and showing that we aren’t just a great product, but increasingly also a great business. We are doing so on a timeline that has exceeded even our own expectations. This all bodes very well for the future.”
Spotify expects an additional 13 million new users in Q3 and five million more premium subscribers as they debut their Basic plan in Britain and Australia, and expand their video catalog. Moreover, the company predicts they’ll see over $4 billion in revenue from July to September.