Spotify hit 100 million paid subscribers in the first quarter, at the high end of its outlook, supported by its tie-in with Google speakers and launch in India. The company also reported better-than-expected profitability, leading to a small improvement in its full-year outlook for reduced operating losses.
Premium subscribers rose 32 percent year-on-year to 100 million at the end of March, and total monthly active users were up 26 percent to 217 million. The company said its promotion in the US and Canada performed better than planned, and it also profited from demand for its Family Plan and bundled offer with Hulu. In addition, the free Google Home Mini offer was extended to the UK and France in March, and Spotify launched in February in India, where it now has over 2 million users.
Quarterly revenues rose 33 percent to EUR 1.511 billion, also at the top of expectations, with a 34 percent increase in Premium revenue. Average revenue per user was EUR 4.71 in Q1, roughly flat year-on-year and down 2 percent at constant currency rates. The gross margin improved to 24.7 percent, above Spotify's guidance, helped by the strong growth in Premium subscribers and a slower start to the expansion in podcasts.
Despite a 30 percent increase in operating costs year-on-year, Spotify's operating loss was smaller than expected, at USD 47 million. This led to an upgrade in the full year forecast, to a loss of USD 180-340 million, compared to a forecast in February of USD 200-360 million. Free cash flow was a positive EUR 170 million in Q1, double the year-earlier figure.
For the second quarter, Spotify forecast MAUs up 23-27 percent year-on-year to 222-228 million, and premium subscribers up 29-34 percent to 107-110 million. Revenue is estimated to grow 18-35 percent to EUR 1.51-1.71 billion, and the gross margin to reach 23.5-25.5 percent. The operating loss is forecast at EUR 15-95 million. Apart from the operating result, the full-year growth outlook is otherwise unchanged from the guidance issued in February.
