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Spotify Reports $3B in Quarterly Revenue as It Adds 6M Subscribers, Parks ‘Car Thing’

Ad-supported revenue was up 31% while average revenue per paid user saw improvement. Investors have responded by sending Spotify's stock price up.

Spotify’s short-lived foray into portable gadgetry has ended, with the company announcing in its second quarter earnings that it has slammed the breaks on manufacturing Car Thing, its standalone smart player for cars that only became widely available in April.

In an earnings call with investors, CFO Paul Vogel explained that the decision was made based on several now-familiar economic factors. “We tested a number of price points and we frankly haven’t seen the volume at the higher prices that would make the current product financially viable,” he said, adding that “rising inflation and component costs, coupled with the expanded lead time needed to order parts has significantly altered the risk/rewards” of continuing to develop the product, which launched at $89.99 in the U.S.


The rest of Spotify’s earnings results, for the quarter ended June 30, were genuinely positive, with the company announcing that its user base grew to 188 premium subscribers and 256 million free (ad-supported) users during Q2, with total monthly active users (MAUs) now hitting the 433 million mark.

Those represent a net increase of 6 million paid users and 10 million MAUs compared to the first quarter. Both of those metrics were above guidance and impacted by reactivations in Europe, growth among young audiences in Latin America and outperformance in developing markets including India, Indonesia and The Philippines. The company noted that if you exclude its exit from Russia and a previously disclosed service outage in March that led to several million existing users creating new accounts, it believes it had its biggest biggest Q2 yet in terms of MAU growth.

Total revenue in the second quarter was 2.86 billion euros ($3 billion), up 23% year over year. Most of Q2 revenue came from subscriber income, which grew 22% y/y to 2.5 billion euros ($2.6 billion), boosted by continued strength in family plans, promotional campaigns and growth in Europe and Latin America. Ad-supported revenue outperformed, increasing 31% y/y to 360 million euros ($377 million) and now accounting for 13% of total revenue. Though it doesn’t break it out, Spotify said Podcast revenue grew in the “strong double-digit range Y/Y,” led by a strong sales period by the Spotify Audience Network.

In morning trading, investors gave a mighty shrug to the Car Thing thing and responded to the positive quarterly results — presumably that big bump in ad revenue — by going on a buying spree. Since Tuesday’s close at $104, Spotify’s share price has jumped more than 14% to around $119.

Elsewhere in the disclosure, the closely-watched average revenue per user (ARPU) metric for premium subscribers was up 6% y/y to 4.54 euros ($4.76), which the company said was aided by last year’s price increases but offset by growth in family plans.

The company said the decision to curtail Car Thing resulted in a one-time charge of 31 million euros ($32 million) and impacted its gross margin, the remainder after royalties and other content associated, which was 24.6% of total revenue compared to 25.2% in Q1 and 28.4% a year ago. Vogel said the move to sunset the device should minimize further gross margin impact and cash flow going forward.

Spotify reported an operating loss of 194 million euros ($203 million), up from 6 million euros in Q1 and a 12 million euros profit back in Q2 2021. The company cited the 31 million euros charge tied to ending Car Thing and increased publishing rates, but primarily higher personnel costs due to headcount growth and higher advertising costs. (Spotify recently announced it will cut back on hiring by 25% in the second half of 2022.)

The company said that its business has more than 3.6 billion euros ($3.7 billion) in liquidity and that its free cash flow was 37 million euros ($39 million), up slightly year over year.

As for non-music content, Spotify highlighted that it now has 4.4 million podcasts streaming on the platform — an increase of 400,000 since Q1 — including 100 new original podcasts.

During the quarter, the company closed on its acquisitions of audiobook platform Findaway and AI voice platform Sonantic.

Financial metrics (Q2 2022 vs. Q2 2021)

  • Revenue: €2.864 billion up 23% from €2.331 billion
  • Gross margin: 24.6% vs. 28.4%
  • Operating loss (profit): -€194 million vs +€12 million
  • Free cash flow: €37 million vs €34 million

Listener metrics

  • Subscribers: 188 million up 14% from 165 million
  • Ad-supported listeners: 256 million up 22% from 210 million
  • Total listeners (MAUs): 433 million up 19% from 365 million

Q3 guidance

  • Revenue: €3 billion
  • Subscribers: 194 million
  • MAUs: 450 million