Spotify Q4 Earnings: Revenue Beat, Higher ARPU and Premium Growth Drive Profitability, Issues Strong Q1 Outlook

Spotify Technology SPOT stock gained Tuesday after the company reported better-than-expected fiscal fourth-quarter 2024 financial results. Here’s a look at the key figures from the quarter.The Details: Spotify reported quarterly earnings of $1.88 per share, which missed the analyst consensus estimate of $2.06.The company reported quarterly sales of $4.53 billion (4.24 billion euros), up by 16% year-on-year, which beat the analyst consensus estimate of $4.15 billion.Also Read: Taiwan Semiconductor Plans Massive 1nm Fab 25 in Taiwan, Boosting Advanced Chipmaking CapacityThe company reported monthly average user (MAU) net additions of 35 million quarter-over-quarter, surpassing guidance by ten million, and subscriber net additions of 11 million, also ahead by three million.Premium subscribers grew 11% year-over-year to 263 million, reflecting year-over-year and quarter-over-quarter growth across all regions, beating expectations by $3 million.Within Premium, the average revenue per user (ARPU) rose by 5% year over year to 4.85 euros, and ad-supported revenue rose 7%.Margins: The gross margin improved by 555 bps to 32.2%, driven by improvements in its Premium and Ad-Supported segments.The Premium gross margin was 34.7%, up 565 bps year over year, driven by favorability from audiobooks, music, and Other Costs of Revenue. The ad-supported gross margin was 15.1%, up 351 bps year over year. This was driven by favorability from music, Other Cost of Revenue, and podcasts, partially offset by real estate impairment activity.Operating income improved to 477 million euros with a margin of 11.2%.Spotify held 7.5 billion euros in cash and equivalents, generating €877 million in free cash flow.Outlook: Spotify expects fiscal first-quarter 2025 revenue of $4.48 billion (4.2 billion euros) versus a consensus of $4.17 billion and total MAUs of 678 million. Spotify paid $10 billion to the music industry in 2024, contributing ~$60 billion since its founding. The premium subscribers rose to 252 million.In January 2025, at least five Wall Street firms, including Goldman Sachs, Keybanc, UBS, and Macquarie, raised their price targets on Spotify.Spotify Technology stock surged 146% in the last 12 months.Price action: SPOT stock traded higher by 7.41% at $588.30 at the last check on Tuesday.Also Read:Amazon, Temu, and Shein Under EU Scrutiny, Regulators Target Illegal Products and Tougher E-Commerce RulesPhoto via Shutterstock