Shares of music streaming service Spotify Technology SA SPOT popped 12% on Monday morning after reporting better-than-expected third-quarter results.
The Swedish company posted net income of 241 million euros ($267.34 million), or 36 cents per share, which was up from 43 million euros, or 23 cents per share, a year ago. Refinitiv analysts were expecting a loss of 29 cents per share.
Revenue grew 28% from the prior-year quarter to 1.73 billion euros, topping estimates of 1.72 billion euros.
The company partially attributed the strong performance to podcasts, as an increase in the number of podcast hours streamed correlated with increased engagement levels and conversion rates of paid users.
While operating expenses increased 11% to 387 million euros on the back of higher expenses for sales and marketing, Spotify said the surprise profit was also helped by a reduction in artist marketing and research and development costs.
The streaming giant recorded a 31% increase in its all-important number of paid subscribers, from 87 million in the year-ago quarter to 113 million as of the end of September. This was slightly above forecasts of 112.9 million Premium users. It also recorded 30% growth in its number of total monthly active users to 248 million.
In regard to competing streaming services like Apple Inc.’s AAPL Apple Music and Amazon.com Inc.’s AMZN Amazon Music, Spotify noted in its earnings release it continues to feel “very good” about its position in the market.
“Relative to Apple, the publicly available data shows that we are adding roughly twice as many subscribers per month as they are,” the report read. “Additionally, we believe that our monthly engagement is roughly 2x as high and our churn is at half the rate. Elsewhere, our estimates imply that we continue to add more users on an absolute basis than Amazon.”
Based on these estimates, Spotify is now guiding for between 120 million and 125 million total premium subscribers for the fourth quarter. The company also anticipates the number of monthly active users will grow to between 255 million and 270 million.
Revenue for the fourth quarter is projected to be between 1.74 billion euros and 1.94 billion euros.
Spotify also announced Chief Financial Officer Barry McCarthy is retiring in January and will be appointed to the board of directors. He is being succeeded by Paul Vogel, who is currently the company’s vice president of financial planning and analysis, treasury and investor relations.
With a market cap of $21.69 billion, shares of Spotify were trading around $135.97 on Monday. GuruFocus estimates the stock has gained 6% year to date.
Disclosure: No positions.
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