Spotify said on Wednesday it expects to hit $100 billion in annual revenue over the next 10 years and promised high profit margins from its expensive expansion into podcasts and audiobooks.
The streaming audio company hosted its first investor day since going public in 2018, hoping to stoke enthusiasm on Wall Street despite a slowing global economy.
To achieve its ambitious goal, Spotify would have to make its revenue nearly 10-fold from 2021 revenue, which were $11.4 billion, with CEO Daniel Ek also forecasting gross margins to jump to 40% and operating margin to 20% in the same time.
“Spotify is going to make these pretty bold goals and we’re going for them because that’s how we see the world and we’re going to invest in it,” Ek said.
Shares of the company rose 6.5% on Wednesday after losing 53% of their market value so far in 2022.worse than the 24% drop in the S&P 500 Communications Services Sector Index, which includes Spotify and other media and social media companies.
Ek began the nearly four-hour presentation to investors by trying to readjust Wall Street’s perception of the company, saying some may think “we’re a bad business, or at least a bad margin business for the foreseeable future.”
One of the reasons for not reaching its long-term goals was its aggressive spending to build its podcast and audiobook platforms. Although Ek said his investments are already performing “better than is probably expected”, with gross margins of 28.5%, very close to reaching the company’s long-term target of 30%-35%.
Spotify chief content officer Dawn Ostroff said the company has spent more than $1 billion on podcasting, and expects podcast revenue to rise materially this year from the $215 million it earned last year. She said the company was still in investment mode, but that he thinks podcasting is a $20 billion opportunity.
Ek expects the podcast business to have the potential to generate margins of 40% to 50% and audiobooks to have margins above 40% as well. He did not specify how long it will take for the company to reach those figures.
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