Spotify expects strong profit on price hikes, user growth

By Jaspreet Singh

(Reuters) -Spotify forecast fourth-quarter profit above Wall Street expectations on Tuesday, betting on robust user growth and a boost from price hikes in the crucial holiday season.

These results mark the company's first earnings report since the September announcement that founder-CEO Daniel Ek will transition to executive chairman in January.

The Swedish audio-streaming giant expects operating income of 620 million euros ($723.04 million) in the fourth quarter, above estimates of 618.6 million euros, according to LSEG-compiled data. It also beat third-quarter earnings expectations.

The company has leaned on price increases in recent years to drive earnings growth, confident that its ubiquity ensures users stick around. It raised the cost of its premium individual plan in more than 150 markets in the September quarter.

CEO Daniel Ek told Reuters that investment priorities center on top-line growth, driving user acquisition in emerging markets and expanding content to include more podcasts, videos and audiobooks.

"We think that there's still a lot of room left for us to grow in our core business."

To draw more users, Spotify rolled out features including a long-awaited high-quality streaming option called lossless audio. It has also tripled its audiobook catalog to 500,000 titles in 14 markets since launching them around two years ago, which the company said last month helped push up audiobook listeners and consumption hours by more than a third.

Spotify has also been doubling down on video content with nearly 500,000 video podcast shows now available on the platform.

In the third quarter, premium subscribers rose 12% to 281 million. Its monthly active users net additions of 17 million took the total to 713 million, exceeding expectations.

It forecast an 8 million increase in premium subscribers to 289 million, marginally below the estimate of 290.9 million, as it faces intense competition from Apple and Amazon's music streaming offerings.

Its quarterly monthly active users forecast of 745 million was above an estimate of 737.3 million.

Its fourth-quarter revenue forecast of 4.5 billion euros was in line with estimates 4.57 billion, after third-quarter revenue topped expectations with a 7% rise.

Spotify's shares were marginally down in volatile morning trading. The stock has risen around 44% this year.

($1 = 0.8575 euros)

(Reporting by Jaspreet Singh in Bengaluru; Editing by Arun Koyyur)