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Spotify Surpasses 500 Million Monthly Active Users, But Premium User Ratio Drops

Spotify, the world’s largest music streaming service, has surpassed 500 million monthly active users for the first time, according to the company’s Q1 2023 earnings report released recently. 

The report reveals the company has 515 million monthly active users, with 210 million paying subscribers, up 15% year-over-year. The company’s total revenue rose 14% to reach €3 billion, attributed to increased subscribers.

However, the company’s ad-supported user base is outstripping its premium users, which has dropped to 43% in the quarter and just under 42% in the previous quarter, likely due to consumer cost savings during the recession. Though revenue from advertising was up 17% year-over-year, it was down 27% quarter-on-quarter and total revenue was down 4%.

Spotify admitted the lower revenue growth was due to macro-related fluctuations in its advertising business. Nevertheless, the company emphasized that monthly active users increased by 26 million overall, versus guidance of 15 million, making it its single largest net addition in the first quarter and second-largest quarterly growth in history.

Spotify’s premium users accounted for 46% of all users in Q1 2019, but the figure is inextricably linked to the company’s cost savings, including cuts in marketing spending. Spotify confirmed earlier this year that it would lay off 6% of its workforce. Despite this, the company’s total revenue rose 14%, and the Q1 2023 earnings report is the best first quarter since going public in 2018.

At the time of writing, Spotify shares are up 5.19% from open, trading at $138 a share, indicating that investors are responding positively to the company’s reported user growth. Spotify’s achievement of surpassing 500 million monthly active users is undoubtedly an impressive milestone, and the company’s focus on increasing its subscriber base continues to show progress. However, the company may need to address its declining ratio of premium listeners to free listeners to sustain its revenue growth in the long term.

Vishak
Vishak
Meet Vishak, TechLog360's Content Editor and tech enthusiast. With a Computer Science degree and a passion for all things tech, Vishak delivers the latest in hardware, apps, and games with expertise. Trusted for his in-depth reviews and industry insights, he's your guide to the digital world. Off-duty, he's exploring photography and virtual gaming landscapes.

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