Spotify $SPOT issued a forecast on Thursday for fourth-quarter operating income of €820 million as it leans on AI-powered features to attract users during the holiday season.
Analysts expected operating income of €813.4 million on average, according to Reuters, based on LSEG data. Spotify stock rose a little under 4% in premarket trading.
The company also forecast fourth-quarter revenue of €5.2 billion and a gross margin of 33.8%. It expects premium subscribers to rise by 10 million to 316 million and monthly active users to rise by 30 million to 818 million.
Analysts surveyed by Visible Alpha expected 314.7 million premium subscribers and 819 million monthly active users, according to Reuters.
“We’ve built a strong business that keeps compounding, we invest when we see a path for growth, our costs are moderating, and there is more runway ahead,” Co-CEO Alex Norström said in a statement, according to Variety.
For the third quarter, Spotify reported revenue of €4.97 billion, up 16% from a year earlier, and operating income of €672 million. Gross margin was 33.0%, and earnings per share were €2.48. The company said operating income beat its own expectations because marketing and personnel costs came in below forecast.
Analysts had expected third-quarter revenue of €4.98 billion and earnings per share of €2.80, according to Reuters. Their average estimate for operating income was €671.8 million, according to Reuters.
Premium subscribers rose by 6 million to 306 million in the quarter, the company said. Monthly active users rose by 11 million to 788 million.
Spotify's AI features range from AI DJ, which strings together custom song sets narrated by a voice, to playlists created from text prompts in which a listener sketches the mood or taste they want, according to Reuters. Investors have been tracking how profitable the company is while it pours money into AI meant to sharpen discovery and boost engagement, and to keep pace with Suno and Udio, startups that generate music, according to Reuters.
This week, Spotify reached a licensing agreement with the distributor Believe covering a forthcoming paid feature that lets fans create AI covers and remixes, according to Reuters. The company has signed licensing deals for the tool with Universal Music Group, Merlin and Kobalt, according to Reuters.
In September, Spotify rolled out a tie-in with Meta $META’s Muse conversational AI agent, which lets listeners direct the agent to start music, save tracks to their libraries and assemble playlists, according to Variety.