Earlier this week, Spotify reported a strong first quarter in 2022, marked by double-digit growth in monthly active users and premium subscribers. MAUs grew to 422 million, a 19% increase year-over-year and a 4% increase from the previous quarter. Premium subscribers grew to 182 million, a 15% increase year-over-year and a 1% increase from the previous quarter.
“Our business exhibited strength and resiliency in Q1. Nearly all of our key metrics surpassed guidance, led by MAU outperformance, healthy revenue growth, and better Gross Margin. Excluding the impact of our exit from Russia, subscriber growth exceeded expectations as well. Overall, we are very pleased with the performance of the business and remain highly encouraged by the traction we are seeing,” said Spotify in an April 27, 2022 letter to shareholders.
Spotify shared the following highlights for the first quarter of 2022:
- Spotify reported total revenue of €2.661 billion, or $2.8 billion U.S., a 24% increase year-over-year.
- Premium revenue was €2.379 billion, or $2.50 billion U.S., a 23% increase year-over-year.
- Ad-supported revenue was €282 million, or $296.43 million U.S., an increase of 31% year-over-year.
- Premium ARPU was €4.38, or $4.60, an increase of 6% year-over-year.
- Gross Margin was 25.2%, Premium Gross Margin was 28.4%, and Ad-Supported Gross Margin was (1.5)%.
- MAU growth was strong among Gen Z users because of new product features and marketing and content initiatives.
- Growth in premium subscribers was below guidance, but the company attributes part of this to the loss of 1.5 million subscribers when the service left Russia. Growth was higher than expected in Latin America and Europe.
“We achieved our largest Q1 ever for Ad-Supported Revenue (11% of Total Revenue) and saw strong Y/Y growth across all regions and channels. Music Ad-Supported Revenue benefited from a Y/Y increase in impressions and healthy double-digit growth in CPMs. Podcast revenue strength was led by the Spotify Audience Network along with continued growth across existing Spotify studios and our exclusive licensing deals,” said Spotify.
Spotify provided the following operational highlights for the first quarter:
- In March, the streaming service experienced a brief service outage that logged users out of the service. Some impacted users created new accounts to log back in which resulted in 3 million more MAUs, which are included in the 422 million total. The actual number of MAUs may be 419 million.
- At the end of the quarter, Spotify had 4.0 million podcasts on the platform, compared to 3.6 at the end of the fourth quarter of 2021.
- Spotify collaborated with IKEA to offer the integration of Spotify on IKEA’s Bluetooth speaker lamp, Vappeby.
As previously reported, Spotify and Google reached a multiyear agreement with Google for User Choice Billing, giving Android users more choices in payment options and creating a frictionless user experience for all in-app transactions. The launch will occur later this year. Users who download Spotify from the Google Play Store will be available to pay via Spotify or Google Play Billing, the first time they’ve been offered such a choice. In addition, Spotify announced a partnership with Walmart, giving six-month free trials to Walmart+ members in the United States.
During the first quarter, Spotify announced their acquisition of Podsights to help advertisers measure and scale podcast advertising and Chartable, a podcast analytics platform. In March, Spotify shared they developed a long-term partnership with FC Barcelona Spotify as their official audio streaming partner.
Second quarter outlook
Spotify provided the following guidance for the second quarter of the year:
- Total MAUs: 428 million
- Total Premium Subscribers: 187 million
- Total Revenue: €2.80 billion, or $2.94 billion U.S.
- Gross Margin: 25.2%
- Operating Profit/Loss €(197) million, or $(207.08) million U.S.
Despite the controversy around Joe Rogan over COVID misinformation, the company’s exit from Russia, and the service outage, Spotify managed to grow revenue and subscribers during the first quarter of 2022. The company also scored some key partnerships and launch new product features, while also securing a long-awaited deal with Google on billing. According to TechCrunch, investors weren’t particularly impressed with the projected loss of another 600,000 subscribers from Russia or the slightly lower gross margin, but Spotify is looking pretty solid.