Spotify subscriber surge drives Q3 revenue growth
Spotify Delivers Strong Growth, Demonstrating the Power of Compounding
Spotify has successfully navigated the latest quarter, proving that its strategy of investing in its community and expanding its content ecosystem continues to pay off. The company reported adding more net new premium subscribers than anticipated in the third quarter, fueling double-digit increases in both revenue and operating income while managing operational costs effectively.
Total revenue climbed a robust 14% in constant currency, reaching €4.97 billion ($5.63 billion) for the quarter ending September 30. This growth was underpinned by strong performance across both premium and advertising segments. Revenue from paying users increased by 15% year-over-year to €4.5 billion ($5.08 billion), reflecting sustained engagement from its dedicated fanbase.
The user base remains expansive and healthy, with Monthly Active Users (MAUs) growing by 11% to 788 million worldwide. This growth in platform usage is consistent with the company’s outlook, indicating that the multi-quarter rebuild of Spotify’s advertising technology stack is beginning to show positive results. Ad-supported revenue also contributed to the success story, rising 9% to €482 million ($546 million).
Financially, the growth translated into significant operational improvements. Operating income surged by 12% to €672 million ($761 million). Furthermore, the company managed to expand its gross margin to 33%, driven by efficiency gains across both its premium and ad-supported businesses. The premium segment maintained a healthy gross margin of 34.5%, while the ad-supported segment achieved 18.7%.
While operating expenses rose by about 26% to €967 million ($1.1 billion) due to strategic investment in marketing and cloud/AI technologies, the company demonstrated strong operational leverage. The operating margin stood at 13.5%, showcasing the executives’ ability to drive growth while managing the substantial costs associated with content creation.
Alex Norström, Spotify’s co-CEO, reflected on the quarter’s performance, emphasizing the company’s core philosophy. He noted that the success stems from building a business that keeps compounding, focusing on investment when growth paths are clear, and leveraging the world’s most passionate music, podcast, and book fans on the platform.
Looking ahead, the company remains confident in its trajectory. For the fourth quarter, Spotify expects MAUs to increase by 30 million net new additions, reaching 818 million, and anticipates 10 million net new premium subscribers, bringing the total to 316 million. The outlook for Q4 revenue is set at €5.2 billion, with projected operating income of €820 million ($929 million) and a gross margin of 33.8%.
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