Why Did SPOT Stock Rise 7% Pre-Market Today?

• Spotify’s total monthly active users reached 713 million in the third quarter, a 11% year-on-year.
• Following its Q3 earnings, Spotify’s stock traded over 4% higher in Tuesday’s premarket.
• The company’s gross margin expanded to 31.6%, improving 53 basis points YoY.

Spotify Technology S.A. (NYSE: SPOT) announced on Tuesday that it has surpassed 700 million Monthly Active Users and achieved double-digit subscriber growth in the third quarter (Q3).

Following its Q3 earnings, Spotify’s stock traded over 4% higher in Tuesday’s premarket. On Stocktwits, retail sentiment around the stock improved to ‘extremely bullish’ from ‘bullish’ territory the previous day, and message volume jumped to ‘high’ from ‘low’ levels in 24 hours. 

Q3 Highlights 

Spotify’s total monthly active users reached 713 million in the third quarter, a 11% year-on-year (YoY). Premium subscribers rose 12% YoY to 281 million. 

Revenue climbed to €4.27 ($4.90 billion) billion, up 7% YoY, driven largely by growth in its Premium segment. Earnings per share (EPS) for the quarter was €3.28. Both revenue and EPS exceeded the analysts’ consensus estimate of €4.23 billion and €2.02, respectively, according to Fiscal AI data. 

“The business is healthy. We’re shipping faster than ever. And we have the tools we need – pricing, product innovation, operational leverage, and eventually the ads turnaround – to deliver both revenue growth and profit expansion.” 

-Daniel Ek, Founder and CEO, Spotify 

Stronger Margins and Cash Flow

The company’s gross margin expanded to 31.6%, improving 53 basis points YoY. Operating income rose 28.1% YoY to €582 million, supported by lower social charges and tighter cost management in marketing and personnel. 

Spotify generated €806 million in free cash flow, boosting its liquidity position to €9.1 billion in cash, restricted cash, and short-term investments.

For the fourth quarter, the streaming giant anticipates having 745 million monthly active users. Revenue is expected to be €4.5 billion with a gross margin of 32.9%. 

Exchange Rate: €1=$1.15

Also See:Dan Ives Calls Palantir’s Commercial Business Surge A ‘Major Validation Moment’

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