Spotify Technology reported a fiscal fourth-quarter earnings miss, but shares were boosted by strong guidance and an uptick in subscriber growth, gross margins, free cash flow, and average revenue per user. The company’s operating loss of 75 million euros in the quarter was ahead of updated company guidance, and it also saw a strong Q1 operating income of 180 million euros, well ahead of Wall Street consensus expectations. CEO Daniel Ek emphasized the company’s recent “efficiency” strategy, stating that the hurdle rate for any new type of investments will be much higher than what it has been and that the company will be more diligent and disciplined in shutting down previous processes that no longer serve this new mandate.
While Spotify is navigating through operational challenges, it remains focused on profitability amid recent price hikes and changes to its podcasting strategy. The company saw an increase in subscriber growth, gross margins, free cash flow, and average revenue per user, which contributed to a climb in shares by as much as 11% shortly after the opening bell. Despite the earnings miss, strong guidance and positive performance metrics have driven investor optimism and contributed to an overall positive outlook for the music-streaming platform. Spotify’s emphasis on efficiency and profitability is expected to drive continued growth and success in the future.
Spotify CEO Daniel Ek emphasized the company’s commitment to strategic efficiency on the earnings call, noting that the company will be more disciplined in its approach to new investments, shutting down previous processes that no longer serve its new mandate. This emphasis on operational efficiency, combined with an increase in subscriber growth and other performance metrics, has contributed to a boost in shares and an overall positive outlook for the company in the coming quarters.