Despite record growth Spotify continues to lose money and is forecast to continue on a losing streak for the next two quarters according to its latest (Q2 2018) financial reports.
Spotify grew its user base finishing the quarter with 180 million Monthly Active Users (MAU) and 83 million Premium Subscribers, up 30% and 40% respectively year on year. Revenue for the quarter was €1,273 million, up 26% and 34% year on year for the two user types.
Yet despite this impressive growth the company posted net losses of €394 million which is more than twice the €188 million that it lost in the same period in 2017. Its operating loss, €90 million, was also 14% higher than in the same period in 2017.
Projections from the company predict 200 million active users by year end and revenues of €1.5 bn per quarter with losses ranging anywhere from €20-€100 million per quarter.
Tencent Music investment
Spotify owns Tencent Music Entertainment Group (TME) shares, through its parent, Tencent Holdings Limited and these are held as a long term investment on Spotify’s balance sheet. TME has announced its intention to list its shares in the US through a registered public offering. Spotify estimate that this would result in a significant gain sufficient to trigger a tax benefit large enough to generate positive net income for the company in the quarter of the IPO. Spotify states that if this was to happen then it would be a one-time, non-recurring event and they expect the business to once again generate a net loss in following quarters.
The full financial statement can be read here.
China’s Tencent Music looks to go public in US
Spotify had 3,969 full-time staff at 30th June noting that Research & Development made up the greatest share of hiring during this quarter and accounted for almost half of the added headcount.
Spotify went public on the New York stock exchange in April 2018 and ended its first day of trading with a market value of $27bn, despite never having made a profit. It is now worth about $34bn.
