Spotify Technology SA (SPOT.N) on Tuesday forecast that the number of listeners would reach 500 million in the current quarter as it reported fourth-quarter results that beat expectations for both active users and subscribers.
Shares in the company rose 9% in trading before the bell.
After investing heavily in 2022 to build up its podcast and audiobooks business, the company is trying to rein in operating expenses that grew at twice the speed of its revenue last year by laying off 600 employees and reducing other costs.
“We always knew that 2022 would be an investment year and 2023 will be a year where we would slow down the investments and thereby operating expenditure while revenue keeps on climbing,” Chief Financial Officer Paul Vogel said in an interview.
The number of monthly active users rose to 489 million in the quarter, beating Spotify’s guidance and analysts’ forecasts of 477.9 million, helped by marketing campaigns and growth in India and Indonesia.
Premium subscribers, who account for most of the company’s revenue, increased 14% to 205 million, topping estimates of 202.3 million, according to IBES data from Refinitiv.
Apart from the forecast of half a billion users, Spotify also expects premium subscribers to reach 207 million in the current quarter and revenue of 3.1 billion euros ($3.35 billion). Analysts were expecting 202 million subscribers and revenue of 3.05 billion euros.
“Q1 is always the smallest quarter with respect to user growth. We don’t have the same level of marketing campaign, as we do in Q2 to Q4,” Chief Executive Daniel Ek said.
Spotify last year laid out plans to get 1 billion users by 2030 and to reach $100 billion revenue annually. It also promised high-margin returns from its costly expansion into podcasts and audiobooks.
The company has invested more than $1 billion in building out its podcast business which currently has more than 4 million titles. But those investments have hit gross margins.
In autumn, Spotify canceled 11 original podcasts from Parcast and Gimlet, two studios the company acquired in 2019, shifting focus to original and exclusive shows that attract listeners, such as Warner Bros’ “Batman Unburied,” or the thriller “Caso 63.”
Dawn Ostroff, the head of content and advertising who helped shape Spotify’s podcast business, was also leaving the company after four years.
Ek said there was no plan to reshape podcasting business after her exit.
“Spotify will double down on things that worked well and stop doing the things that don’t work,” he said. “We are a lot more focused on efficiency.”
In 2023, the company expects revenue to begin to grow faster than operating expenses, which have jumped due to headcount growth and higher advertising costs.
($1 = 0.9246 euros)