São Paulo — Swedish audio-streaming company Spotify (SPOT) reported a strong second quarter, enhanced by the acceleration in the growth of users, 5 million ahead of the company’s guidance. Global subscriber growth also exceeded expectations by 1 million, as Latin America’s Gen Z audience represented year-over-year growth following new music releases, the company said on Wednesday.
Last quarter, Spotify also pointed to LatAm as the main reason for users’ growth. In the first quarter, the streaming service said it benefited from outperformance in Latin America, driven by Brazil and Mexico.
In the second quarter, Spotify reported that total monthly active users grew 19% year-over-year to 433 million, up from 422 million last quarter. Besides LatAm’s younger generation users’ growth, the company said the quarterly performance was impacted by outperformance in India, Indonesia, and the Philippines as a result of marketing campaigns, and strength in Europe largely due to higher reactivations.
During an investors’ call, Spotify’s CEO Daniel Ek said emerging markets have a far greater future potential than the so-called “developed market”.
“If you create a mental model near to middle-term, you should see most users growth should come from emerging markets. We think near to middle-term, revenue should come from developed markets. The great story is that we believe we can upsell more podcasts, audiobooks, so users spend more time and increase our revenue opportunities there [in emerging markets] too.”
Ek stated that more user growth should come to emerging markets mid to long-term following monetization opportunities. “On the emerging market side, it will require more work for monetization, it will be a mid to long story.”
The streaming’s premium subscribers grew 14% year-to-year to 188 million, up from 182 million last quarter pushed by outperformance across all regions led by Europe and Latin America, according to Spotify.
It also posted strong growth in podcasts, driving advertisements and demand. Spotify also said it doesn’t expect the economic downturn to affect the business, but in an anticipation of a slowdown, it reduced hiring, following other big tech companies such as Google, Apple, and Microsoft.
During the investors’ call, Spotify said it is prepared if things could get worse but recession or not, it remains confident in the business.
Shares rose 14% and were traded at $119.33 at 11:18 EDT.