Spotify Technology's second-quarter profitability was driven by gross-margin expansion, with gross margin reaching 33.4%, up 193 basis points year over year. The improvement came from gains in both the Premium and Ad-Supported businesses, though the underlying drivers differed: in Premium, revenues grew faster than music costs after accounting for marketplace programs, while lower audiobook and video-podcast costs also helped, and in Ad-Supported, favorable podcast and tax effects more than offset higher music costs and other costs of revenue. Spotify reported operating income of €655 million in the quarter, even as expenses rose on temporary investments in marketing and cloud and artificial intelligence initiatives, excluding social charges, and operating expenses included €1 million in social charges related to share-based compensation. The company had 7,302 full-time employees worldwide at quarter-end, and the results suggest its improving cost-to-revenue relationship, rather than expense restraint, drove the profitability advance. Spotify, Apple and Amazon each currently carry a Zacks Rank #3 (Hold).
Spotify Technology SAQ2 gross margin rose to 33.4% and operating income reached €655 million on improved cost-to-revenue relationship.
