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Slowing revenue growth was masked by currency tailwinds While bears can criticise Spotify's lack of gross margin expansion since IPO, it is difficult to criticise their user growth or engagement, which has increased like clockwork each quarter.

Spotify User Growth (Spotify Q3 2022 Shareholder Deck) Ad-supported MAUs increased by 24% YoY from 220m to 273m, driven primarily by strength in developing markets like Brazil and India. guidance of 450m) and 13% YoY growth in premium subscribers from 172m to 195m (vs. In Q3, Spotify reported 20% YoY growth in total MAUs from 381m to 456m (vs. While other entertainment streaming platforms like Netflix ( NFLX) appear to be fast approaching peak subscriber saturation, Spotify's user growth has either remained flat or accelerated over the past few quarters. User growth shows no signs of slowing down It's time for Spotify management to begin to "walk the walk" rather than "talk the talk". While I remain a committed long-term shareholder (and have continued to average down throughout 2022), my patience is beginning to wear thin. In this article, I present my thoughts on Spotify's latest Q3 2022 results. Indeed, Spotify trades at comfortably their lowest EV/LTM revenue multiple (1.1x) since their IPO, reflecting investor scepticism around their business model.

Spotify has struggled to gain traction in the public markets, falling 44% from their IPO price in April 2018 and 66% in 2022 alone. In short, the main bear case for Spotify has always been that while it may be a good "product", it is not a good "business" or "investment". Despite consistent 20%+ MAU growth and a strong market leadership position, Spotify as an investment has attracted significant scepticism from investors.īulls point to Spotify's demonstrated track record of growing MAUs and premium subscribers, rave customer reviews (4.8/5 on the App Store from 23.6m reviews), excellent brand recognition, industry-leading churn rates, strong balance sheet, and a visionary CEO (Daniel Ek) who some have argued single-handedly rescued the music industry from potential extinction.īears point to Spotify's lack of gross margin expansion since IPO due to high dependence on record labels like Universal Music Group (AMS:UMG), lack of consistent operating profitability, and a management team that cares little about representing shareholder interests. Spotify ( NYSE: SPOT) is the largest global audio streaming platform with 456m monthly active users (MAUs) and 195m premium subscribers. Travel the world to capture moments and beautiful photos.