Spotify Technology SA said on Wednesday that it aims to reach $100 billion in annual revenue in the next ten years and that its costly growth into podcasts and audiobooks will yield high-margin returns.
The audio streaming service had its first investor day so far going public in 2018, trying to pique Wall Street’s interest despite the global economic slowdown.
Spotify’s revenue would have to increase roughly 10-fold from $11.4 billion in 2021 to accomplish its ambitious objective, while Chief Executive Daniel Ek expects gross margins to soar to 40% and operating margins to 20% at the same time.
“Spotify will put out these pretty audacious targets and we are going after these because that’s how we see the world and we are going to invest behind that,” Ek said.
The company’s stock surged 6.5 percent on Wednesday after losing 53% of its market value in 2022, outperforming the S&P 500 communication services sector index, which includes Spotify and other media and social network companies, by 24 percent.
Ek began the nearly four-hour investor presentation by attempting to change Wall Street’s perceptions of the company, stating that “we’re a bad business or at least a business with bad margins for the foreseeable future.”
One of the causes of the company’s failure to meet its long-term objectives was its excessive spending to expand its podcast and audiobook platforms.
Though Ek claims that its investments are doing “better than you probably imagine,” with gross margins of 28.5 percent, the firm is well on its approach to meeting its long-term objective of 30 percent to 35 percent.
Dawn Ostroff, Spotify’s chief content officer, said the firm has committed more than $1 billion on podcasts and expects podcast income to grow significantly this year compared to last year’s $215 million (200 million euros).
She stated that the company is still in the investing phase, but that podcasting represents a $20 billion possibility.
To read our blog on “Spotify’s “free” trial is now costing money,” click here.
