Spotify CEO Daniel Ek says “the very dire macro environment” isn’t stopping the company’s momentum; A strong outlook for subscribers increases abused inventory

Spotify CEO Daniel Eck says the “scary macro environment” of inflation and other headwinds won’t slow the company’s momentum.

He made the comments during the company’s second quarter earnings call. The company reported total revenue of $ 2.9 billion, up 23% and exceeding the consensus expectations of Wall Street analysts. The net loss widened to $ 126.8 million, or 86 cents per share, which did not reach Street’s consensus, although any profitability problems were more than offset by strong underwriting trends.

The company said it had 433 million monthly active users at the end of the quarter, 5 million more than forecast and 19% more than a year ago. Its premium subscriber list reached 188 million, up 14% and 1 million more than the company’s lead.

The continued strategic push to podcasting, through acquisitions of vendors like Gimlet and The Ringer, as well as deals with Joe Rogan and other big names in the industry, led to record levels of podcast viewing in the quarter, the company said. The number of podcasts available to Spotify users and subscribers now reaches 4.4 million.

Eck said the audio category is “different from all other media” in terms of opportunities to connect with consumers and deliver value to advertisers. Cars are not just a “massive use case, especially in North America,” but people outside of cars are hearing more and more headphones and earphones, and Eck says this represents “a huge opportunity in native advertising.” Audio is a great beneficiary of this. … Despite a very difficult macroeconomic environment, advertisers are doing very well.

Spotify said it plans to add 6 million premium subscribers and 17 million users in the third quarter. Ultimately, he expects a gross margin of 25.2% and continued unfavorable exchange rates will see the operating loss widen further to $ 221.4 million in the quarter.

User growth and strong third-quarter guidance led Spotify’s shares up 7% in pre-market trading. Like many tech stocks, Spotify suffered a setback in 2022 and lost more than half of its value over the course of the year.

In the premium business, average revenue per user increased 6% to $ 4.59, marking the fourth quarter of improvement in this metric. For years, the company has been under financial pressure by offering discounts to new subscribers. More recently, it has pushed prices higher, which has helped ARPU. Often when streaming companies hike their prices, they experience a high level of abandonment, but Spotify CFO Paul Vogel said there has been “no impact” since the last price hike so far.

Subscription revenue, a top-of-the-line unit, increased 22% to $ 2.5 billion, while advertising revenue increased 31% to $ 364 million.

Eck and the other executives did not list all the macroeconomic challenges facing their businesses and others, but did mention Russia’s withdrawal from the country’s invasion of neighboring Ukraine. Even with those withdrawals, they said they expect to surpass their initial projections for subscribers and full-fledged customers in 2022.

On the personnel front, there was recognition of the difficult economic climate. The company expects to reduce its staff growth rate by 25% in the second half of 2022.