Spotify Sees Profit Growth but Shares Slip with CEO Departure

Spotify reported its first full-year profit in 2024 after years of growth and diversification, yet its shares took a hit with the surprise announcement of CEO Daniel Ek stepping down. The tunes are changing not just on the platform but also at the top of the company’s leadership.

The music streaming company, Spotify Technology SA (NYSE: SPOT), closed 2024 with a net income of about $1.17 billion (€1.14 billion), bouncing back from a loss of $593.9 million (€505 million) the prior year. This milestone came as the company expanded beyond music into podcasts and audiobooks, broadening its content and revenue base. Revenue for the full year hit nearly $16 billion (€15.7 billion), an 18.3% increase from 2023, driven by an 11% rise in paid subscribers to 263 million and a total monthly active user base of 675 million by year-end. The growth was particularly notable in the last quarter, where Spotify added 35 million active users and 11 million subscribers, marking record gains. 

Daniel Ek, who founded Spotify in 2006 and led it through nearly two decades from a Swedish startup to a dominant global force, announced he will step down as CEO on January 1st next year. He will stay on as executive chairman, focusing on long-term strategy and capital allocation while handing daily operations to two co-CEOs, Gustav Söderström and Alex Norström. Both have been integral to Spotify’s strategy and operations for years and are now set to lead the company together. Ek emphasized that the management change formalizes a structure they have essentially operated under since 2023, aiming for continuity rather than disruption. 

Despite Spotify’s impressive financial turnaround and record subscriber growth, the market reaction was notably negative. Spotify’s shares dropped over 5% at the opening of trading on today, interrupting a recent upward trend that had seen the stock rise more than 60% year-to-date. This dip reflects investor caution around leadership changes, particularly from a founder with such a distinctive vision and history with the company. Analysts pointed out that although Spotify posted strong user growth and expanded its offerings, an unexpected quarterly loss and cautious guidance also weighed on sentiment. Challenges such as foreign exchange headwinds and a slight dip in advertising revenue added to the concerns. Still, some market watchers see potential in Spotify’s pricing strategies and content diversification, viewing the share drop as a potential buying opportunity. 

Spotify’s profitability milestone last year validated years of investment in technology and content. The company achieved record operating income of approx. $559.9 million ($€477 million) in the fourth quarter, with gross margins reaching 32.2%, an improvement of over  percentage points from the prior year. Notably, Spotify paid out record-setting royalties to the music industry, underscoring its commitment to artists and content creators even as it pursued profitability. CEO Ek expressed optimism about 2025, signaling plans to continue investing in music and enhancing the user experience while maintaining operational efficiency. 

The move into podcasts and audiobooks has been a critical part of Spotify’s strategy, helping the company broaden its audience and revenue sources. This diversification came after years of intense competition in music streaming, and it appears to have paid off by providing new growth engines and higher-margin content. Alongside this, Spotify has introduced new AI-driven features and expanded subscription tiers, including pricing increases that contributed to revenue growth without significant subscriber loss. Throughout these changes, Spotify has remained focused on fostering creativity and delivering value to its users across 180 markets. 

Daniel Ek’s stepping down marks the end of an era for Spotify, but it also signals a new chapter as the co-CEOs take over and the company aims to sustain its growth momentum amid evolving market dynamics. Investors and users alike will be watching closely to see how Spotify navigates this leadership transition while continuing to evolve its platform and expand its global reach.