$5B Revenue, 713M Users, 281M Subscribers

Spotify said on Tuesday its third quarter revenue and profit margin improved thanks to double-digit growth in subscribers and monthly active users.

The leading music and podcast streaming platform said its pool of paying subscribers rose by 12% to 281 million, and its monthly average users rose 11% to 713 million from the year-ago quarter. Paying users drove a 12% uptick in revenue to 4.3 billion euros ($5 billion), and helped expand the company’s gross margin by 56 basis points to 31.6%. Overall gross profit rose 9% to 1.35 billion euros ($1.84 billion).

 “The business is healthy. We have the tools we need – pricing, product innovation, operational leverage, and eventually the ads turnaround – to deliver both revenue growth and profit expansion,” Spotify founder and CEO Daniel Ek said in a statement. “It all comes back to user fundamentals and that’s where we are: 700 million users who keep coming back, engagement at all-time highs. We’re building Spotify for the long-term.”

Revenue from paying subscribers rose 9%, while the revenue collected from ad-supported accounts fell 6%, reflecting Spotify’s ongoing challenges in the ad market.

Spotify’s operating income increased 28% to 582 million euros ($682 million) from a year ago, due to the company’s strong stock price performance during the quarter, lower marketing and personnel costs and a strong gross margin, the company said. Social charges came in 41 million euros below what the company expected due to stock price movement.

Executives will discuss earnings in greater depth on a conference call starting at 8 a.m. New York time.

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