That goal, he added, had been hindered by aggressive spending on both the podcast and audiobook side of the business.Īs for the music side of the business, Spotify's management team said it expects to see gross profit operating leverage to grow 75 basis points on average as the platform leans on Marketplace - an initiative that allows artists and labels to pay Spotify to promote their music. Spotify Founder and CEO Daniel Ek said that the company is "performing much better than you probably suspect," highlighting that overall gross margins of roughly 28.5% are approaching the company's long-term goal of 30% to 35%. The announcement marked the first time the platform disclosed its podcast figures after sinking a whopping $1 billion into the unit. On the other hand, if margin progress feels like it's being pushed out then we may have to revisit our long-term outlook." 'The real debate'ĭuring the investor day last week, Spotify shares surged after the company revealed it brought in roughly $215 million in podcast revenue last year. "We could turn more bullish if the margin story really starts to shine through. "We've never doubted SPOT's user and revenue growth, so we can be convinced of a stronger margin inflection," Wells Fargo's Cahall said.
At the same time, Cahall warned that now the company "must execute to keep us convinced or turn us more bullish."
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