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Spotify (NYSE:SPOT) just delivered a knockout quarter, sending shares up 11.7% at 2:27 PM as investors cheered its first full year of profitability. The audio streaming giant crushed expectations on user growth, with monthly active users hitting 675 milliontopping analyst estimateswhile premium subscribers climbed 11% year-over-year to 263 million. Revenue landed at 4.2 billion, and free cash flow surged 121% to 877 million, reinforcing its financial firepower. Gross margin hit a record 32.2%, signaling stronger operational efficiency. CEO Daniel Ek remains bullish on 2025, emphasizing that Spotify is ramping up investments to drive long-term growth while maintaining the efficiency gains from last year.
A major factor behind Spotify's blowout quarter? The wildly successful "Spotify Wrapped" campaign, which helped fuel the largest-ever Q4 net addition of 35 million MAUs. But not everything was perfectad revenue growth lagged at just 7%, highlighting ongoing challenges in monetizing its free-tier user base. The company also took a 96 million hit from unexpected social charges tied to its surging stock price. Still, Spotify's cash reserves are nearing 7.5 billion, giving it ample room to invest in expansion, including new content verticals like audiobooks and video podcasts. These moves position the company to diversify its revenue and strengthen its competitive edge in an increasingly crowded streaming landscape.
Looking ahead, Spotify is projecting 548 million in operating income for Q1, with revenue expected to hit 4.2 billion. Management is staying optimistic despite foreign exchange headwinds, betting on continued subscriber growth and potential price hikes to keep the momentum going. Investors will be watching closely to see how Spotify balances scale with profitability, particularly in its ad-supported segment. With a clear focus on innovation, user acquisition, and content expansion, Spotify is doubling down on its long-term visionone that could keep it at the top of the streaming game for years to come.
This article first appeared on GuruFocus.