Financial Data and Key Metrics Changes - Monthly Active Users (MAU) grew by 3 million to 678 million, with 5 million net subscribers added, reaching 268 million, a 12% year-on-year increase [21] - Total revenue was €4.2 billion, growing 15% year-on-year on a constant currency basis [21] - Premium revenue rose 16% year-on-year on a constant currency basis, driven by subscriber growth and ARPU gains [22] - Gross margin came in at 31.6%, surpassing guidance by approximately 10 basis points and expanding about 400 basis points year-on-year [23] - Free cash flow was €34 million, driven by growth in operating income and improving net working capital [24] Business Line Data and Key Metrics Changes - The advertising business delivered currency-neutral growth of 5% year-on-year, with a low double-digit growth excluding near-term impacts from strategic initiatives [22] - The Spotify Partner Program for video podcasters launched in January, expanding to nine new markets and resulting in users spending 44% more time with video content [13] - Audiobooks continued to expand in premium, driving higher user and author engagement [14] Market Data and Key Metrics Changes - Emerging markets drove two-thirds of the subscriber outperformance, particularly in Latin America and Asia Pacific, while developed markets also saw solid growth [15] - Over 10,000 advertisers leveraged new automated tools in Q1, representing a 21% year-over-year increase [19] Company Strategy and Development Direction - The company is focusing on delivering the best possible experience to users and creators, with a commitment to accelerate innovation in 2025, termed the year of accelerated execution [11] - The strategy includes maximizing catalog offerings and enhancing monetization for creators, particularly through the Spotify Partner Program [55] - The company aims to maintain a strong balance sheet while prioritizing internal growth opportunities [72] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the broader macro environment's uncertainty but expressed confidence in Spotify's long-term growth trajectory [6] - The company expects a stronger second half of 2025 for MAU net adds, consistent with historical seasonality [90] - Management remains optimistic about the advertising business, despite some pricing softness, due to strong internal demand and a unified ad stack [48] Other Important Information - The company ended the quarter with €8 billion in cash and short-term investments, indicating a strong financial position [24] - The upcoming maturity of exchangeable notes is factored into the capital allocation framework, but the company remains confident in its balance sheet [26] Q&A Session Summary Question: 2025 outlook and gross margin expectations - The company expects Q4 2025 gross margin to be up year-over-year and anticipates MAU net adds to be within the range of the past four years without requiring higher marketing spend [28] Question: Super fan product details - The company is working on higher tiers around new offerings, focusing on increasing value to users while needing support from industry partners [30][32] Question: AI's role in product velocity and efficiency - AI is seen as a key enabler for personalization and productivity, with ongoing investments to enhance user experience and internal processes [38][40] Question: Economics of podcaster payouts - The $100 million payout to podcasters aligns with expectations, with engagement metrics being the primary KPIs to monitor [41][44] Question: Advertising business commentary - Despite pricing softness, the company is seeing strong internal demand and has built a robust advertising platform that welcomes diverse demand sources [46][49] Question: Subscriber growth dynamics - The company is experiencing strong underlying performance, with a focus on enhancing the value-to-price ratio driving subscriber growth [50][51] Question: Video content strategy - The addition of video is driven by creator demand, with ongoing improvements to the TV experience and engagement metrics showing positive trends [56][58] Question: Financial impact from rights renewals - All financial impacts from recent rights renewals are reflected in the financial numbers as per contractual agreements [60] Question: Audiobooks growth strategy - The company sees significant opportunities in improving the user experience for audiobooks and expanding non-English content for international growth [62] Question: Pricing opportunities - The company views pricing as a lever to pull as growth stabilizes, with a focus on maintaining a strong value-to-price ratio [63][68] Question: Capital allocation priorities - The company prioritizes growth opportunities while maintaining a strong balance sheet, with shareholder returns considered as excess capacity rises [70][72] Question: Revenue growth targets - The company remains focused on increasing consumer value, with confidence in reaccelerating growth despite challenges [73][75] Question: Near-term noise and financial implications - The "noise" refers to broader market conditions, with no specific concerns for Spotify's business, maintaining a positive long-term outlook [82] Question: Video podcast consumption trends - Video content consumption has grown significantly, particularly among Gen Z, indicating strong engagement metrics [84]