Spotify packed in a strong end to the pandemic-riddled year, topping forecasts for Premium subscribers to reach 155 million (up 24%) in the fourth quarter of 2020. The audio streamer’s total users grew 27%, to 345 million in Q4, after netting a record gain of 74 million for the full year.
The company touted its podcast strategy. As of Q4, Spotify had 2.2 million podcasts on the platform (up from 1.9 million podcasts the prior quarter) and 25% of its total user base engaged with podcast content in the quarter (up from 22% in Q3). In addition, podcast consumption hours in Q4 nearly doubled year-over-year. “We have increasing conviction in the causal relationship between the growth in podcast consumption driving higher [long-term value] and retention among our user base,” Spotify said in its Q4 shareholder letter.
Spotify exceed Q4 financial targets for revenue (excluding the impact of foreign exchange rates), on ad sales growth of 29%, and operating margin.
“Despite the global uncertainty of 2020, it was a remarkable year for Spotify,” Spotify CEO and founder Daniel Ek said in announcing the results. “Following a strong Q2 and Q3, Q4 met or exceeded our guidance by nearly every metric.”
But shares of Spotify fell more than 5% in premarket trading, with a forecast for 2021 that may have been lighter than some investors anticipated.
For Q1 2021, the company is projecting total users of 354 million-364 million and paid subscribers of 155 million-158 million. For the full year, Spotify expects to reach MAUs between 407 million-427 million
and total Premium subscribers of 172 million-184 million.
Spotify noted, “Given the extraordinary operating circumstances we currently face with respect to the impact of COVID-19 there is a greater likelihood of variances within those ranges than typical quarters.”
“We ended 2020 with strong Q4 performance as the business delivered substantial [monthly active user] growth, subscriber additions that exceeded our guidance, an improvement in ARPU trends, acceleration of users who engage with podcast content, better than expected Gross Margin, and Free Cash Flow of €74 million,” Spotify said in the shareholder letter. “Given the strong Q4 performance, we believe we are well positioned for continued growth in 2021.”
More to come.