(Reuters) – Spotify Technology SA’s (SPOT.N) posted a surprise profit on Monday and topped Wall Street’s expectations for revenue as the music streaming company added slightly more subscribers than expected for its premium service.
A trader is reflected in a computer screen displaying the Spotify brand before the company begins selling as a direct listing on the floor of the New York Stock Exchange in New York, U.S., April 3, 2018. REUTERS/Lucas Jackson
The Swedish company, which has outstripped Apple Music (AAPL.O) in the race to dominate music streaming globally, said its number of premium subscribers had risen by 26 million in the past year to 113 million at the end of September.
That still leaves Spotify some way behind video streaming giant Netflix’s 158 million subscribers but was just above the 112.9 million expected by analysts, according to IBES data from Refinitiv.
It said it had also reduced artist marketing and research and development costs in the quarter, contributing to the surprise profit.
Shares in the company, which have underperformed Wall Street’s main indexes with a 6% gain since the start of this year, rose nearly 2% to $123 after the results release.
Spotify, which launched its service over a decade ago, has been able to overcome resistance from large record labels and some major music artists to reshape how people listen to music.
By far the world’s most popular music streaming service, it forecast fourth-quarter total premium subscribers in a range of 120 million to 125 million, the mid-point of which was in line with expectations of 122.6 million.
The company expects its broader measure of monthly average users to grow to between 255 million and 270 million in the current quarter, above analysts’ average estimate of 259.7 million.
For the third quarter, net income attributable to shareholders was 241 million euros ($267.34 million), or 36 cents per share, compared with 43 million euros, or 23 cents per share, a year earlier. Analysts were expecting a loss of 29 cents per share.
Operating expenses rose 11% to 387 million euros, with expenses in sales and marketing up almost 22% from a year earlier.
Revenue, however, rose 28% to 1.73 billion euros for the three-months ended Sept. 30. Analysts were expecting revenue of 1.72 billion euros.
The company also said Chief Financial Officer Barry McCarthy would retire in January and be replaced by its current vice-president of Financial Planning and Analysis, Treasury and Investor Relations, Paul Vogel.
Reporting by Neha Malara and Supantha Mukherjee in Bengaluru; Editing by Shinjini Ganguli and Patrick Graham