(BFM Bourse) – The streaming specialist announced this Monday that it would cut around 17% of its workforce, or around 1,500 employees. Since the start of the year, the stock has gained around 130%.
Spotify is once again sizing up its workforce. The Swedish online listening (streaming) specialist announced this Monday, December 4 that it would cut 17% of its workforce, which represents around 1,500 people.
“Economic growth has slowed considerably and capital has become more expensive. Spotify is no exception to these realities,” explained the general manager, Daniel Ek, quoted in a press release. “For those who leave us, we are a better company because of your dedication and hard work. Thank you for sharing your talents with us,” he added.
This is the group’s third wave of workforce reductions in 2023, with Spotify having already announced cuts of 600 employees in January and then 200 in June.
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Return to profits
Both the scale and timing of these announcements may be surprising. In the third quarter, Spotify recovered and became profitable again, generating a positive operating result of 32 million euros compared to a loss of 247 million euros in the previous quarter (and 228 million euros a year earlier). . Its free cash flow, an important indicator for assessing the financial health of fast-growing companies, stood at 216 million euros compared to 35 million euros a year earlier.
“I am aware that for many, a reduction of this magnitude will seem surprisingly significant given recent positive results and our performance. (…) However, given the gap between our financial target and our current operational costs, I “I decided that substantial action aimed at resizing our costs was the best option to achieve our objectives,” argued Daniel Ek.
“Today we still have too many people dedicated to supporting work and even doing work around work rather than contributing to opportunities that have real impact,” the executive continued. “Adopting this lean structure will also allow us to invest our profits more strategically in the company,” assured the CEO.
This drastic rationalization measure is currently well received by the market, with Spotify shares gaining 6.5% around 2:50 p.m., in pre-opening trading on Wall Street.
Good run in 2023
Over the whole of 2023, Spotify saw its price recover 128%, after it is true a complicated year 2022, during which the action was divided by not very far from 3. The improvement in results and especially the anticipations of the end of interest rate increases, which weigh down technology and/or growth stocks like Spotify, have fueled this progression, which brings Spotify’s market capitalization to $34 billion.
“We remain optimistic about the long-term potential of Spotify, which should benefit from improved advertising and greater penetration of existing markets,” Bank of America explained at the end of October.
“In addition, price increases and recent management comments and actions on spending should enable continued improvement in Spotify’s underlying margin trajectory,” the American bank continued. The establishment expects the company to still generate an operating profit of 37 million euros in the fourth quarter, then 286 million euros in 2024.
Julien Marion – ©2023 BFM Bourse