By Anne Steele

Spotify reported its first ever full year of profitability, fueled by record user growth and austerity measures after years of heavy spending on growth initiatives such as podcasts.

Its fourth-quarter earnings are a sign that the company has been able to wean itself off years of intense investment and transform from a music-streaming service with tough margins to a full-service audio company.

Spotify swung to a fourth-quarter profit of 367 million euros, or EUR1.76 a share, from a loss of EUR70 million, or 36 euro cents a share, a year ago. Analysts expected EUR1.99 a share, according to FactSet.

Net income for the year was EUR1.14 billion, equivalent to about $1.18 billion, compared with a loss of EUR532 million in 2023.

Monthly active users climbed 12% to 675 million -- the largest fourth quarter in the company's history and topping guidance by 10 million.

Spotify shares are up 20% so far this year.

When Spotify went public nearly seven years ago, it told investors it would give priority to growth over profits in an effort to establish itself as the dominant audio-streaming service. After spending over $1 billion on podcasting and facing pressure from investors to turn a profit, the company in 2023 shifted its focus to cost controls and laid off about a fifth of its workforce.

It raised subscription prices in many regions around the world last year, including in the U.S. for the second time, further juicing its revenue. Executives promised sustained profits last year while pushing into audiobooks.

Other key highlights from Spotify's fourth-quarter earnings:

   -- Revenue rose 16% to EUR4.24 billion, topping guidance. 
 
   -- Gross margin of 32.2% was stronger than its guidance and ahead of the 
      goal it set at a 2022 investor day of achieving 30% gross margins between 
      2025 and 2027. 
 
   -- Premium subscribers, Spotify's most lucrative type of customer, grew 11% 
      to 263 million, above expectations. 
 
   -- Average revenue per user for its subscription business ticked up 5% to 
      EUR4.85, thanks to price increases. The metric has been pressured as 
      Spotify brings in new subscribers via discounted plans and lower prices 
      in emerging markets. 
 
   -- Ad-supported revenue grew 7% to EUR537 million, driven by both music and 
      podcasts. 

Write to Anne Steele at anne.steele@wsj.com

(END) Dow Jones Newswires

February 04, 2025 06:00 ET (11:00 GMT)

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