Spotify Q3 2018 Earnings: Metrics on Track But Investors Not Convinced

The 20,000 Foot View: Spotify’s Q3 2018 earnings once again showed continued solid progress across most of its performance metrics, with strong progress in many areas. However, weakening investor confidence across US tech stocks as a whole, coupled perhaps unrealistic investor expectations saw Spotify’s share price fall again.

Key Findings

  • Spotify reported 87 million subscribers in Q3 2018, up x% on Q3 2017, which is in line with MIDiA’s x million forecast made at the start of 2018
  • Inactive subscribers were up by one million to reach five million – the first increase since Q3 2017
  • Ad supported monthly active users (MAUs) X in Q3 2018, adding X million users – the same increase that was registered one year previously
  • A pattern of season cyclicity is emerging for Spotify’s ad supported business
  • Subscriber growth was largely the same across all regions, but ad supported grew strongly in Latin America – up X%
  • Gross margin in Q3 2018 fell slightly from the previous quarter to reach X% reflecting the recurring six monthly cycle of promotional campaigns
  • Premium revenue grew by X% during Q3 2018 to reach €X billion, a faster rate than the X% by which subscribers increased during the same period, with a gross margin of X%
  • Ad supported was still just X% of total revenue in Q3, adding just €X million of revenue, compared to €X million for premium revenue
  • Spotify ARPU was down in Q3 2018 across three key measures: premium, rights holder and gross profit
  • Churning out users from Q2 promotional trials drove ARPU down in Q3
  • Quarterly subscriber churn was down to X%, the second successive quarter of decline, down X% each quarter year-on-year
  • Factoring in churn, Spotify added X million subscribers in total, which means that it lost X million, X more than X
  • Delivering good, steady growth is good enough for the music industry, but not good enough for investors

Companies and brands mentioned in this report: Spotify

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Includes Synopsis, PDF, Slides and Dataset