• Total Revenue: EUR 4.2 billion, 17% year-on-year growth on a constant currency basis.
• Premium Revenue Growth: 19% year-on-year on a constant currency basis.
• Advertising Revenue Growth: 6% currency-neutral growth.
• Gross Margin: 32.2%, surpassing guidance by 40 basis points.
• Operating Income: EUR 477 million.
• Free Cash Flow: EUR 877 million.
• Cash and Short-term Investments: EUR 7.5 billion.
• Monthly Active Users (MAU): 675 million, an increase of 35 million.
• Subscribers: 263 million, with 11 million net additions.

• Warning! GuruFocus has detected 3 Warning Sign with PEP.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Spotify Technology SA (NYSE:SPOT) reported its highest Q4 ever for Monthly Active User (MAU) additions and record high subscriber additions.
• The company achieved record highs for revenue, gross margin, operating income, and free cash flow, marking its first full year of profitability.
• Innovations in video and audiobooks contributed significantly to growth, with over 330,000 video podcasts globally and 270 million users streaming them.
• The Wrapped campaign saw over 245 million users engage, surpassing previous records and driving significant business growth.
• Spotify Technology SA (NYSE:SPOT) plans to focus on accelerated execution in 2025, aiming to ship improvements faster and invest in core music experiences.

Negative Points

• Advertising growth was only 6% on a currency-neutral basis, reflecting challenges in marketer spending and brand-related campaigns.
• The company acknowledged being late in transitioning to programmatic advertising, which is expected to take time to scale.
• Q1 2025 is expected to be seasonally weaker, with lower MAU and subscriber intake, impacting revenue and gross margins.
• There is potential variability in gross margins due to targeted investments in core offerings like video and music.
• The company faces competitive dynamics in developing markets, although some competitors have exited, benefiting Spotify.

Q & A Highlights

Q: Can you elaborate on Spotify's focus for 2025, following the themes of previous years? A: Daniel Ek, CEO, stated that 2025 is coined as the "year of accelerated execution." The company aims to increase product velocity, double down on music, and maintain discipline in execution, leveraging advancements in AI and organizational readiness.

Q: How is Spotify approaching capital allocation given its rising profitability? A: Christian Luiga, CFO, emphasized prioritizing business investments first, with potential shareholder returns considered if excess capacity arises. The focus remains on sustainable growth opportunities with attractive returns.

Q: What are the implications of Spotify's new deal with Universal Music Group? A: Daniel Ek highlighted that the agreement allows Spotify to double down on music and explore new services. The focus is on creating a win-win dynamic with labels, emphasizing scale and profitability growth.

Q: Why is Spotify's advertising growth lagging despite its large audience? A: Christian Luiga acknowledged the delay in transitioning to programmatic advertising but noted that technical build-out is largely complete. The company expects to scale in 2026, with 2025 being a year of building.

Q: How does Spotify plan to adjust pricing in an inflationary environment? A: Alex Norstrom, Co-President, stated that ARPU growth will come from price adjustments, future tiering, and selling add-ons. Spotify balances value and price, adding features and content to justify price increases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.