Spotify’s U.S. Price Increase Welcomed by Investors as Stock Spikes

Shares of Spotify rose as high as $317.00, up 6.8% from the previous day’s closing price, after the company announced Monday (June 3) that it will raise subscription prices in the United States. The stock closed on Monday at $310.80, up 4.7%, bringing its year-to-date gain to 65.4%. 

Price increases have done wonders for Spotify’s share price this year. The stock also jumped 8.2% on April 3 after reports surfaced that the company would raise prices in the United Kingdom and Australia, among other markets. Spotify’s 2023 price increases fueled the company’s first-quarter results and drove the stock to its 52-week high of $319.30 on April 23. Revenue reached a record 3.6 billion euros ($3.9 billion), up 20%, and gross margin improved to 27.6% from 25.2% in the prior-year period. 

Investors weren’t sure about the impact of price increases on Spotify’s business, however. After Spotify announced its first broad price increase on July 24, 2023, its share price plummeted 14.3% to $140.38 — putting its stock at less than half the current price. Spotify had not instituted across-the-board price increases since its launch, and investors may have been wary about subscribers fleeing for free alternatives.

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But Spotify has proved to have a considerable amount of pricing power, and subscribers mostly took the increases in stride. Spotify’s subscriptions grew 1% to 239 million at the end of March, up from 236 million at the end of December, and were up 14% from 210 million at the end of the first quarter of 2023. Interim CFO Ben Kung said during the company’s April 23 earnings call that past price increases “had minimal impacts on growth” and that Spotify expects average revenue per user (ARPU) to improve again in the second quarter. 

Layoffs have also driven Spotify’s share price higher. The company’s Dec. 4, 2023, announcement that it would cut 17% of its global workforce led the stock to gain 7.5% that day. The combination of higher prices and lower salary expenses put Spotify on track to delivering the improved margins and profitability company executives promised investors in 2022. Its operating expenses in the first quarter were down 9% year-over-year and operating income — what’s left after salaries, general administrative expenses, marketing and royalties — improved to 168 million euros from an operating loss of 156 million euros in the prior-year period.

Monday’s high of $317.00 was the stock’s second-highest point of 2024. Spotify reached its all-time high of $387.44 on Feb. 22, 2021, amid investor hype about the company’s podcast ambitions and the boom in streaming stocks during a pandemic-fueled demand for at-home entertainment.