1 in 12 people on Earth is now a Spotify monthly active user

After spending years struggling to turn a profit, Spotify’s financial 2024 Wrapped was music to the ears of investors. 

Off the back of better-than-expected Q4 earnings this morning — with soaring subscriber numbers and bumper cash flows that helped the company post its first-ever full year of profitability — Spotify shares are soaring 10%, reaching all-time highs that are up ~150% from a year prior.

Track record

The audio streaming giant reported record user numbers, adding a total of 35 million monthly active users (up 12%) to hit 675 million in total, beating analyst expectations and marking the largest Q4 in Spotify's history. (With Earth’s population at about 8 billion, that means about 1 in 12 people in the world is a user.) The share of ad-supported users on the platform remained close to ~60%, and premium subscribers grew some 11% year over year to 263 million.

Despite multiple rounds of price hikes, the latest of which saw the cost of Spotify Premium rise to $11.99 a month, the company is succeeding in keeping users locked in, with churn rates staying low and the tally of free listeners continuing to tick up. It seems that an emphasis on product features is working to make the service more appealing to audiophiles: the report outlined that Spotify’s 10th annual Wrapped last year was its biggest ever, reaching 184 global markets and driving user engagement up 10% year over year.

Fine tune

Amped-up user numbers contributed in no small part to the first full-year profit in Spotify’s history. The company reported that quarterly operating income rose to €477 million ($485 million) — a U-turn from the prior year’s €42 million loss — bumping net income to a total of €1.14 billion ($1.2 billion) for 2024. 

Beyond listening power, the “efficiency strategy” championed by founder and CEO Daniel Ek is also paying off: in Q4, gross profit margins climbed to a record 32.2%, free cash flow generation reached an all-time high of €877 million, and operating expenses declined 16% year on year. Indeed, the company has honed in on finally achieving profitability in recent years, overseeing a series of company-wide layoffs and cutting some marketing spend.

Play on, pay out

Looking forward, Ek has said that Spotify will “continue to place bets that will drive long-term impact,” including maintaining these levels of efficiency while focusing on diversifying content, prioritizing new partnerships — including, most recently, with Universal Music, the biggest music company in the world — and doubling down on creator monetization programs.

On top of the hot-button issue of audience-driven payouts for artists (Spotify was keen to tell everyone that it forked out over a record $10 billion to the music industry in 2024), the company also outlined plans to enhance business offerings for increasingly important podcast creators and authors with new, tailored payout schemes.