Spotify's Q2 user base jumps to 433 million on 'outperformance' in India, Indonesia

The Spotify logo on a smartphone.

Audio streaming service Spotify added 19 million monthly active users (MAUs) for the quarter ended June 30, 2022, taking its total base to 433 million users, driven by outperformance in India, Indonesia and the Philippines.

In a note to shareholders, Spotify said this was its largest ever growth in the second quarter and the outperformance in India, Indonesia and the Philippines was a result of marketing campaigns and increased device bundling initiatives. However, it didn't disclose any further details on its user base in the country.

Higher reactivations in Europe and annual growth in Gen Z audience in Latin America alongside new music releases also contributed to the user growth in the quarter.

Paying subscribers grew by 14 percent year-on-year (YoY) to 188 million in Q2, aided by promotional intake and household plans. The service added six million subscribers during the quarter, with growth led by Europe and Latin America.

Revenue from subscriptions, which contributes a majority of its topline, grew by 22 percent YoY to €2.5 billion (approximately $2.54 billion) for the quarter while revenue from advertising increased by 31 percent YoY to €360 million (approximately $365 million).

The total revenue grew by 23 percent YoY to €2.9 billion (approximately $2.94 billion) for the quarter from €2.3 billion (around $2.33 billion) in the same quarter last year while the net loss widened to €125 million (around $127 million) for the quarter from €20 million (around $20.3 million) in the same quarter last year.

The company also disclosed that it has decided to stop manufacturing its in-car smart audio player 'Car Thing' which has resulted in a cost of €31 million ($31.5 million). This also dragged down the service's gross margin to 24.6 percent from 28.4 percent a year ago.

Car Thing was Spotify's first foray into hardware and it went on sale to the general public in February 2022. It essentially made it easier for users to listen to music and podcasts on the platform while they drive.

Last month, Spotify told investors that it expects to hit one billion users and $100 billion annual revenue by 2030, anticipating high margin returns from its rapid foray into podcasts and audiobooks. Spotify CEO Daniel Ek said he expects the podcast business to potentially generate margins between 40 percent and 50 percent and audiobooks to have margins over 40 percent.

The company had said it has committed more than $1 billion on podcasting and expects podcast revenue to materially increase this year from $215 million (€200 million) last year.

In the shareholder note on July 27, Spotify mentioned that it released 100 new original and exclusive podcasts across the world during the quarter. It now has 4.4 million podcasts on the platform and the number of MAUs that "engaged with podcasts grew in the substantial double-digits year-on-year and per user podcast consumption rates continued to rise".

During the quarter, the company closed the acquisition of Findaway, which is expected to help Spotify accelerate its foray into the audiobooks market. It also purchased Sonantic, a dynamic AI voice platform that creates voices from the text.

That said, Ek also told employees in June 2022 that they would reduce hiring plans by 25 percent in the second half of 2022, amid broader economic uncertainty.