Spotify's Paid Subscriber Tally Up to 87 Million, Driving Total Revenue for Third Quarter

Spotify's premium user growth slowed in the third quarter with the music streaming leader now boasting 87 million paid subscribers, a 5 percent increase of four million over the last period. That rate of 1.3 million new subscribers per month was down from the 2.6 million per month it averaged in the prior three-month period when it added 8 million premium users.

Ad-supported monthly active users now total 109 million, an increase of 8 percent on the quarter and 20 percent year over year. The company points to updates to its interface for driving retention, but also cautions that the metrics may include some "fake" users, bots or manipulative accounts that its ongoing quality assurance campaign have yet to purge.

Overall, total monthly active users rose to 191 million in Q3, up 6 percent from the previous quarter and 28 percent year over year.

Total revenue for the quarter was €1.352 billion ($1.54 billion), an increase of 31 percent year-over-year and 6 percent compared to last quarter. Of that revenue tally, the vast majority (€1.21 billion / $1.38 billion) came from premium subscribers, an increase of 5 percent quarterly; ad-supported revenue totaled €142 million ($161 million), an increase of 16 percent since Q2.

Operating expenses totaled €348 million ($396 million) in Q3, resulting in a total operating loss of €6 million ($6.8 million). As of Sept. 30, Spotify says it had 4,040 full-time employees and contractors globally. A reevaluation of the company's investment in China's Tencent Music, which is poised to go public, resulted in Spotify's first net income in its history, at €43 million ($49 million) for the quarter. Net losses came out to €394 million ($448 million) in the prior three month period.

During the quarter, the company generated €80 million ($91 million) in net cash flows from operating activities and had €33 million ($37.6 million) in free cash flow. It is reporting €1.8 billion ($2 billion) in cash and cash equivalents, restricted cash, and short term investments.

In the fourth quarter, Spotify expects its total premium subscribers to increase to 93-96 million and it MAUs to between 199-206 million. The company is projecting anywhere between €1.35-€1.55 billion ($1.54-$1.77 billion) in total revenue for the quarter.