Spotify turns up volume to make record profits

Music streaming giant Spotify has announced record profits of over €1bn (£860m) after a year of cutting costs and laying off staff.

The Swedish company has been growing its user base for years, offering subscribers access to podcasts and audiobooks.

But its quarterly gross profit came at the expense of missing its forecast for monthly active users.

Last year it cut 17% of its workforce in a move to clamp down on costs.

Spotify's CEO Daniel Ek said last December about 1,500 jobs would be axed as part of "substantial action to rightsize our costs" so that the company could meet its objectives.

But the tech company has been on a mission expand worldwide and reach a billion users by 2030.

On Tuesday it announced that mission would start again in earnest, with money being spent to win over new audiences.

"We are going to add back some marketing spend over the year," Mr Ek said. "Because we want to keep on having the growth and we saw that in some territories, we may have pulled back a little bit too much."

Much of Spotify's profits were driven by its podcast business. Gross margins rose to 27.6% in the quarter, up from 25.2% a year earlier.

It invested over a billion euros to build up its podcast business, including spending hundreds of millions for popular shows such as the "The Joe Rogan Experience".

"It [podcasting] was a drag last year. Now it is another profit centre for us," Mr Ek said.

The company's quarterly revenue rose 20% to €3.64bn, beating estimates of €3.61bn.

Spotify has raised prices to boost revenue and experimented with different subscription plans.

The streaming service would also provide a music-only tier for "those consumers that only care about the music side", the firm's CEO said.

Spotify currently has 615 million users, a shade down on its own forecast of 618 million for the quarter. It aims to have 631 million midway through the year.

However, the number of premium subscribers rose by 14% in the first quarter to 239 million, in line with estimates.

Spotify shares, which initially fell on the quarter results, reversed course to rise 8% in premarket trading on Tuesday.

Since it launched in 2006, Spotify has invested a huge amount of money growing the business, and in securing exclusive content.

Podcasts created by Michelle and Barack Obama, as well as the Duke and Duchess of Sussex, have all featured on the platform.

The deal with Harry and Meghan cost a reported $25m (£19.7m) and saw just 12 episodes delivered over two-and-a-half years before the deal ended last June.