Spotify hits 300 million subscribers and changes rules for free users

Music giant Spotify Technology has released mixed second-quarter financial results. On the one hand, the company is breaking all-time subscriber milestones, but on the other hand, slightly lower-than-expected profits caused an immediate 5.9% drop in the value of its shares on the stock exchange.

Spotify’s total quarterly revenue reached €4.8 billion, up 15% year-on-year. In particular, the Premium subscription segment grew, generating the majority of this revenue thanks to 9% subscriber growth and higher “revenue” per user. Gross margin reached a record 33.4%, and operating profit amounted to €655 million. The company’s free cash flow increased to €797 million.

The main reason for investor uncertainty lies in the net profit per share, which reached €2.40 (analysts expected €2.53). Despite this, the platform now has 777 million monthly active users. To achieve market stability in countries such as India and Indonesia, management is now deliberately introducing more restrictions for free users. By reducing support for older mobile devices and more frequent ads, they want to encourage these users to switch to paid packages. This is a rather risky move that could reduce overall growth in new users in the short term.

In the area of new technologies, Spotify is investing heavily in artificial intelligence and additional content. They are testing a new desktop application, Studio by Spotify Labs, and expanding the Audiobooks+ offering, which is already generating significant revenue. They have also introduced the Reserved option for pre-emptive purchase of concert tickets. However, it is worth remaining somewhat skeptical about new AI tools for music creation, as the company is still negotiating licensing rights with some of the largest labels.