Spotify reveals it now has 320m users and 144m subscribers in Q3 financials

Spotify reveals it now has 320m users and 144m subscribers in Q3 financials

Spotify Technology S.A. today reported financial results for the third fiscal quarter of 2020 ending September 30, 2020.

The business performed at a high level in Q3. Highlights included strong MAU and subscriber growth, a recovery in global consumption hours, record low churn below 4%, better than expected Gross Margin, and Free Cash Flow of €103 million. Headwinds included negative effects from FX movements which slowed revenue growth by 500 bps on a constant currency basis. Revenue was slightly better than expected excluding the impact of FX.

Notably, some of our more mature regions exhibited accelerating user growth, our advertising business returned to growth, and new market launches in Russia and 12 surrounding markets unlocked significant pent-up demand, adding a helpful accelerant to our results.

Spotify reveals it now has 320m users and 144m subscribers in Q3 financials


Total MAUs grew 29% Y/Y to 320 million in the quarter and above the top end of our guidance range. From a regional perspective, Y/Y growth in North America and Europe accelerated more than 400 bps and 100 bps, respectively, while Latin America and Rest of World continued to see the fastest growth, growing 30% and 51%, respectively.

The MAU outperformance was buoyed by India, which benefited from successful marketing campaigns, as well as stronger than expected results from our July launches in Russia, CIS, and the Balkans, with Russia serving as the largest upside driver. We are particularly encouraged by our MAU strength this quarter, as it supports the long-term health of our customer acquisition funnel and gives us confidence as we continue to expand into new markets.

Spotify reveals it now has 320m users and 144m subscribers in Q3 financials Brandspurng1
(Graphic: Business Wire)

Both Latin America and Rest of World had MAU growth in line with, or ahead of, our Q3 forecast. Exiting Q2 we had seen easing COVID pressures in parts of Latin America and Rest of World and this trend continued into Q3. In parts of Latin America, we observed churn improvement and support from new product offerings. Thanks to continued product updates and user flow improvements, we are seeing strong upward trends in new user retention within emerging markets.

While we saw outperformance in Europe in aggregate, we did see a slight shift in Q3 seasonality among a few of our larger markets as we believe summer demand may have been pulled forward into the March and April lockdown periods.

From a content consumption standpoint, global consumption hours surpassed pre-COVID levels during the quarter, and all regions have fully recovered. Consumption trends by the platform have returned to normal usage, including in-car listening hours which is now above the pre-COVID peak. Usage on connected devices inside the home, which saw a spike during the lockdown, also remains above pre-COVID levels.


Our Premium Subscribers grew 27% Y/Y to 144 million in the quarter, reaching the top end of our guidance range. We saw strong subscriber growth across all regions, with the added benefit from our new market launches in Russia and surrounding territories. Russia has been our most successful new market launch to date and represented the largest portion of subscriber outperformance for the quarter. Additionally, we saw a strong performance from the global rollout of our Duo product, with the Duo subscriber growth exceeding our expectations.

Other items of note this quarter included the Google Nest Mini promotion in the UK and Canada, which exceeded our forecast while enhancing our product’s ubiquity, retention, and engagement. We also entered into strategic mobile telco partnerships in Russia (with MTS) and Indonesia (with Telkomsel).

Our average monthly Premium churn rate for the quarter fell below 4% for the first time, marking an 89 bps improvement Y/Y and 49 bps sequentially, driven by churn improvement across all product offerings.



Total revenue of €1,975 million grew 14% Y/Y in Q3 or 19% Y/Y on a constant currency basis (excluding the impact of FX movements). Reported revenue was at the midpoint of our guidance range, as FX headwinds of approximately 500 bps meaningfully exceeded the 260 bps of headwinds incorporated into our plan. The depreciation of the US Dollar vs. the Euro was the primary driver of this variance. Premium revenue grew 15% Y/Y to €1,790 million (or 20% Y/Y in constant currency terms) while Ad-Supported revenue rebounded nicely, growing 9% Y/Y (or 15% Y/Y in constant currency terms).

Within Premium, average revenue per user (“ARPU”) of €4.19 in Q3 was down 10% Y/Y (or down 6% Y/Y in constant currency terms). Excluding FX, product mix accounted for the majority of the ARPU decline, followed by geographic mix. In October, we elected to raise the price of the Family Plan in 7 markets (Australia, Belgium, Switzerland, Bolivia, Peru, Ecuador, and Colombia) alongside Duo in Colombia.

Ad-Supported revenue of €185 million outperformed our forecast, exhibiting a return to growth following the impact of the global pandemic in Q2. We experienced positive Y/Y revenue growth during each month of the quarter, with September finishing particularly strong as business activity moved towards a more normalized state.

The rebound was led by our Podcast and Ad Studio channels, which grew in the strong double-digit range on a Y/Y basis. Notably, the recent rollout of the video in Ad Studio exceeded expectations and post Q3, Ad Studio was rolled out for the first time ever in non-English language markets (Spain and Mexico).

Gross Margin

Gross Margin finished at 24.8% in Q3, toward the top end of our guidance range. A number of factors drove the positive Gross Margin variance, led by better than forecast non-music content costs and Other Cost of Revenues (e.g. payment fees, streaming delivery costs).

Premium Gross Margin was 27.3% in Q3, down slightly from 28.1% in Q2 and up 40 bps Y/Y. Ad-Supported Gross Margin was 0.6% in Q3, up from (11.9)% in Q2 and down 1,200 bps Y/Y. As a reminder, we now account for all content costs related to podcast investment in the Ad-Supported business.

Operating Expenses / Income (Loss)

Operating expenses totalled €529 million in Q3, an increase of 37% Y/Y but short of our plan. Lower than forecast Social Charges accounted for more than half of the shortfall given the decline in our share price during the quarter and lower than expected grants of new equity. Additionally, certain marketing expenses came in lower than expected due to campaign timing shifts and movements in FX. On a Y/Y basis, the growth in operating expenses includes the launch of a global marketing campaign in 2020.

As a reminder, Social Charges are payroll taxes associated with employee salaries and benefits, including share-based compensation. We are subject to social taxes in several countries in which we operate, although Sweden accounts for the bulk of the social costs. We don’t forecast stock price changes in our guidance so upward or downward movements will impact our reported operating expenses.

At the end of Q3, our workforce consisted of 6,357 FTEs globally.

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Product and Platform

As a company, our goal is to continually innovate, testing new features and conducting numerous experiments each quarter as a way to increase connections between creators and listeners while enhancing customer engagement, retention, and LTV. This quarter, we enhanced our lyrics functionality with a long-awaited feature, Lyrics Search. We also added mixed media formats, such as the launch of the Daily Sports playlist, which combines sports commentary and personalities alongside personalized music recommendations.

Additionally, we revamped our podcast charts experience, which is live in 26 markets and gives users the opportunity to see what podcasts are trending. We also have expanded the mixed media playlist Your Daily Drive to users in the UK and Ireland, bringing a personalized mix of news podcasts and music to users, updated daily. Furthermore, we announced that podcast listeners can connect even more deeply with hosts through video podcasts allowing for a more meaningful user experience.


We continue to lean into our goal of becoming the world’s number one audio platform through compelling new music releases and exclusive creative non-music content. As of Q3, we had 1.9 million podcasts on the platform (up from more than 1.5 million podcasts in Q2). Of note, 22% of our Total MAUs engaged with podcast content in Q3 (up from 21% of MAUs in Q2 2020).

Q3 was a standout quarter for our podcasting efforts, beginning with the July launch of The Michelle Obama Podcast, an Original & Exclusive (“O&E”) podcast that became the #1 show globally on our platform in July and August, making it our top summer podcast. In September, The Joe Rogan Experience arrived on platform with video capability and became the #1 show in all of our English-speaking markets while outperforming our audience expectations. We look forward to the start of our exclusivity period for this podcast by the end of this year.

Other select O&E content launches in the US included Mama Knows Best with influencer Addison Rae (Parcast), Best Kept Secrets with Lele Pons (Spotify Studios), 10 Questions with Kyle Brandt (The Ringer), and How to Save a Planet (Gimlet). Internationally, we released 58 new O&E podcasts, bringing our O&E offerings to a total of 16 markets. Select launches included our Southeast Asia original Nas Talks hosted by influencer Nuseir Yassan, international adaptations from Parcast studios with Horoscopes Today in India and Serial Killers in Indonesia, and 9 podcast exclusives in the Philippines.

We also announced that the first title of our DC Comics partnership will be Batman Unburied (to be written and produced by David Goyer), unveiled our first multi-year Esports partnership with Riot Games’ League of Legends (including exclusive and original podcast content), and announced a multi-year first-look deal with Chernin Entertainment to develop our owned podcast IP into film, television, and digital series projects in an effort to attract and reward podcast creators.

Despite the challenges stemming from the COVID-19 pandemic, we saw a 13% increase in new music releases compared with Q2 on our platform. This was led by Taylor Swift’s folklore album, which set a Spotify record for the most first-day album streams by a female artist while making Taylor Swift the most streamed artist on Spotify on any day this year. BTS also released their first all-English-language single Dynamite in August and had the biggest first-day globally on Spotify for a single in 2020.

Two-Sided Marketplace

We continue to work towards our goal of building a diversified digital services platform enabling creator teams to connect, create, and grow their audiences on our platform. In late July, we took another step towards advancing this initiative through the announcement of our partnership with Universal Music Group to help build out new tools and offerings, which is now underway.

The number of artists and their teams utilizing our Spotify for Artists tools on a monthly basis has grown to more than 750,000 and we continue to add new features for the creator community. This quarter, Spotify for Artists introduced Promo Cards, a new tool that allows creators to make shareable social media assets for songs, albums, podcasts, and artist profiles.

On July 31, we merged Spotify Analytics — our data tool for labels and distributors — into Spotify for Artists, to establish one unified fan development platform for the music industry. Artists, managers, labels, and distributors can now manage artist profiles, view and analyze listening data, pitch to playlists, and promote their music altogether in one service.

Given this unprecedented time in the industry, we added three new fundraising options to the Artist Fundraising Pick feature, offering better support for artists in Latin America, Turkey, and New Zealand to amplify their fundraising efforts on their Spotify profiles. Additionally, in September we launched support for artist teams to promote their virtual events on their Spotify profile and our Concerts hub, spaces that previously only featured in-person events.

Our sponsored recommendations continue to gain traction, helping music marketers target listeners based on their streaming behaviour to shift users into an active listening session of their content. During Q3, we saw a 76% increase in unique customers relative to Q2, and we retained 74% of customers from Q2, which we believe is a good sign of customer satisfaction.

We saw demand from both the Major labels and Indies, with Q3 campaigns including Taylor Swift, Machine Gun Kelly, and John Legend. We continue to expand the targeting capabilities for these sponsored recommendations, allowing music marketers to segment their audience by listening behaviour, data that is unique to Spotify.

Free Cash Flow

Free Cash Flow was €103 million in Q3, a €55 million increase Y/Y principally related to favourable working capital movements and reduced cash outflow for PP&E related to office build-outs, partially offset by increased net loss adjusted for non-cash items. We maintain positive working capital dynamics overall and continue to expect that we will deliver positive Free Cash Flow for the year.

In addition to the positive Free Cash Flow dynamics, we maintain a strong liquidity position and are confident in the financial position of the business as we look at the current and future uncertainty surrounding the global health crisis. At the end of Q3, we had €2.0 billion in cash and cash equivalents, restricted cash, and short term investments and no indebtedness2.


These forward-looking statements reflect Spotify’s expectations as of October 29, 2020, and are subject to substantial uncertainty. The estimates below utilize the same methodology we’ve used in prior quarters with respect to our guidance and the potential range of outcomes. 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.

Q4 2020 Guidance:

  • Total MAUs: 340-345 million
  • Total Premium Subscribers: 150-154 million
  • Total Revenue: €2.00-€2.20 billion
    • Assumes approximately 600 bps headwind to growth Y/Y due to movements in foreign exchange rates (prior guidance assumed 360 bps headwind)
  • Gross Margin: 24.2-26.2%
  • Operating Profit/Loss: €(112)-€(32) million