Spotify reaches 300 million premium subscribers as revenue rises 14%

Spotify surpassed 300 million paid subscribers during the second quarter as revenue and profitability increased from a year earlier.

The streaming platform added 7 million premium subscribers during the quarter, bringing its total to 300 million across 184 markets. Paid subscribers increased 9% from a year earlier and exceeded Spotify’s previous guidance by 1 million.

Monthly active users rose 12% year over year to 777 million, an increase of 16 million during the quarter. The figure was 1 million below Spotify’s guidance and slightly below Wall Street estimates.

Revenue increased 14% year over year to €4.78 billion, equivalent to about $5.5 billion. Premium subscription revenue grew 15%, while revenue from the advertising supported business increased 1%.

Spotify reported net income of €545 million, or €2.61 per share, compared with a net loss of €86 million during the same quarter last year. Its gross margin reached a record 33.4%, moving closer to the company’s longer term target of between 35% and 40%.

Free cash flow reached a quarterly record of €797 million.

Spotify shares fell around 2.5% during Tuesday trading after dropping as low as $452.14 earlier in the session. The stock had closed Monday at $486.33.

For the third quarter, Spotify expects to reach 305 million premium subscribers and 788 million monthly active users. The company forecast €5 billion in revenue and a gross margin of 32.9%.

Spotify has expanded its use of AI across music discovery and personalized audio products. The company has introduced personal podcasts generated around users’ interests and is expanding its AI DJ product into additional languages.

Spotify also announced a licensing agreement with Merlin for an upcoming tool that will allow users to create covers and remixes of music from participating artists and songwriters.

The product will be offered as a paid addition to Spotify Premium. Artists represented by labels participating in Merlin’s agreement will be able to choose whether their music is included, and Spotify said participating rights holders will be credited and compensated.

Spotify previously reached similar agreements with Universal Music Group and other music companies as it prepares the covers and remixing product for release.