Spotify has released its financial results for the third quarter of 2021. The results marked an improvement in profitability, with nearly all of its major metrics finishing better than expected, including Monthly Average Users (MAUs), Revenue, Gross Margin, and Operating Income.
Details of the press release showed that Spotify’s monthly active listeners and paid subscribers increased to 381 million and 172 million respectively, a 19 percent year-over-year increase in both cases. Last quarter, the company had 165 million paying customers and 365 million monthly active users, and the latest report shows that Spotify added 16 million listeners and seven million subscribers.
As for Podcasts, Spotify said that there was an increase in the number of people listening to podcasts on its platform, with podcast consumption hours reaching an ”all-time high” in the quarter. It added that it’s catalogue has grown from 2.9 million episodes at the end of the second quarter to 3.2 million by the end of the quarter.
The results also showed that the company’s revenues increased by 27 percent year-on-year to 2.5 billion euros ($2.9 billion) in the third quarter. Notably, ad-supported revenues surged by 75 percent to 323 million euros ($374 million), while subscription revenues grew by 22 percent to 2.18 billion euros ($2.53 billion). What this means is that ads now account for 12.9 percent of Spotify’s overall turnover, reflecting the company’s strong performance in that part of its business. According to the report, higher sold impressions, greater CPMs, and quicker demand within the Spotify Audience Network helped Ad-Supported-Revenue outperform.
Spotify also recorded an operating profit of 75 million euros ($87 million) in the third quarter this year, compared to an operating loss of 40 million euros ($46 million) a year ago. The company’s Gross Margin finished at 26.7 percent in Q3, above the top end of its guidance range and reflecting nearly 200 bps of year-over-year expansion. Premium Gross Margin was 29.1 percent in the third quarter, up 182 bps year-over-year, and Ad-Supported Gross Margin was 10.5 percent, up 993 bps year-over-year.
According to the company’s statement, “the Gross Margin improvement reflected a favorable revenue mix shift towards podcasts, marketplace activity, improved music advertising operating leverage, and Other Cost of Revenue efficiencies (e.g. payment fees, streaming delivery costs), which were partially offset by higher non-music and other content costs and publishing rate increases.”
Shares of the world’s largest audio streaming service increased by 8.2 percent on Wednesday, following the report announcement. Per its guidance for its fourth quarter, Spotify plans to have over 400 monthly active users, and over 177 million premium subscribers by the end of the year.