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After a year with of layoffs and activist attention that triggered many changes, Spotify Technology S.A. (NYSE:SPOT) managed to surpass both top and bottom estimates. Moreover, the streaming giant reported record first quarter earnings as the result of efficient cost-cutting initiatives that also brought significant margin improvements.
For the quarter ended in March, Spotify reported revenue rise 20% YoY to 3.64 billion euros, surpassing LSEG’s estimate of 3.61 billion.
As a result of cost-cutting efforts that included layoffs, Spotify reported earnings of 97 euro cents which equate to $1.04, leaving LSEG’s estimate of 65 euro cents far behind as gross margin reached 27.6%.
Spotify ended its fiscal first quarter with 615 million monthly active users, which was 3 million short of StreetAccount’s estimate, but business grew as MAUs rose 19% YoY and 2% from the previous quarter. As part of cost-cutting measures, Spotify also lowered its marketing activity which also contributed to a more normalized growth. Spotify also grew its subscribers 14% YoY to 239 million.
For the current quarter, Spotify guided for net new MAUs of 16 million, which would bring the total of monthly active users to 631 million. With cost improvements across its business, the Swedish streaming company also forecasted its gross margin will improve to 28.1%.
Shifting its focus on strengthening revenue growth and expanding the margin paid off. In addition, the EU sided with Spotify in its epic battle with Apple Inc (NASDAQ:AAPL) during the quarter. The EU punished Apple with a historic fine for distorting music streaming competition. Due to a complaint from Spotify, the EU already slapped Apple with an antitrust fine of $1.95 billion in March. This is a big victory for Spotify who started complaining back in 2019 about Apple preventing music streaming services from informing users of payment options outside its App Store. Despite the fact Apple is a tech titan, when it comes to music streaming, Spotify is the dominant one. Fortunately for Spotify, EU regulators are ignoring its dominance and going after Apple instead. Therefore, Spotify had a record profit as well as an epic win during the first quarter that will undoubtedly go down in its history.
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This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
