Spotify (SPOT) will report its fiscal fourth quarter earnings on Tuesday before the bell. Wall Street expects the music streamer to post another strong quarter of subscriber gains as churn levels remain low despite recent price increases.
Shares have surged to all-time highs of around $550, up roughly 150% over the past year. The company remains on track to hit full-year profitability for the first time ever, a stark contrast from the record lows the stock faced in 2022.
The company’s colossal run-up in shares follows an intense business overhaul that has included everything from mass layoffs and C-suite shakeups to a major strategic shift away from podcasts, an area it had aggressively pursued.
Here’s what Wall Street expects from the upcoming report, according to Bloomberg consensus estimates:
Revenue: 4.16 billion euros versus 3.67 billion euros in Q4 2023
Adjusted earnings per share: 1.89 euros versus an adjusted loss of 0.36 euros in Q4 2023
Total monthly active users (MAUs): 665 million versus 602 million in Q4 2023
Premium subscribers: 260 million versus 236 million in Q4 2023
At the company’s 2022 Investor Day, Spotify set seemingly lofty objectives that included long-term gross margin targets between 30% and 35%. At the time, the company had been struggling to turn a profit, with its gross margin stuck at around 25%.
In the most recent quarter, Spotify said its gross margin increased to 31.1% from the prior year’s 26.4%. Wall Street is projecting margins to once again expand to 31.8% in Q4. Still, analysts have warned that the pace of margin expansion may slow in 2025 after the metric jumped by over 400 basis points in 2024.
«Even so, there are multiple catalysts on the horizon, including price hikes and the launch of new tiers for superfans,» Bloomberg Intelligence senior media analyst Geetha Ranganathan wrote ahead of the results.
She added, «Ads will also ramp up as Spotify builds [its] own exchange,» while improved monetization «and growth in verticals beyond music, such as audiobooks and podcasting, support a strong earnings trajectory.»
Last year, the company introduced a higher-priced audio «bundle» that includes music, podcasts, and audiobooks. It also rolled out an audiobooks-only plan and a music-only streaming tier in an effort to cater to a variety of consumers. The changes allowed the company to increase prices for the second time in less than a year.
A new multiyear distribution agreement between Spotify and Universal Music Group (UMG.AS) should also be a highlight on the earnings call. The deal, announced last week, includes compensation to artists for recorded songs and publishing rights. In exchange, Spotify will have access to certain upcoming releases and specialized products like video.
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