Spotify shares rise on subscriber gain, margin estimates

 Spotify Technology SA shares jumped Wednesday morning after the music streaming service reported third-quarter growth in subscribers and profit margins, saying lower marketing and personnel costs helped overcome a tough climate for advertising.

Paying subscribers grew to 252 million, the Stockholm-based company said Tuesday in a statement, beating analysts’ estimates of 250.1 million. Total monthly active users increased to 640 million, also exceeding estimates.

The company is showing the benefits of workforce cuts taken late last year, along with the tailwind from continued growth. Its gross margin, a measure of profitability, widened to 31.1%, topping Wall Street expectations, and its operating income surged to €454 million.

Revenue for the quarter increased 19% to €3.99 billion, missing the €4.03 billion average of analysts’ estimates. Advertising revenue increased 6%, held back by low prices in its music business and podcasts.

Shares of Spotify were up as much as 10.3% to $462.39 at 10:03 a.m. in New York, the largest intraday gain since July.

Shares have more than doubled this year, reflecting investor confidence in the company’s ability to grow, raise prices and increase earnings.

This quarter, Spotify predicts active monthly users will increase to 665 million, above Wall Street estimates, while paying subscribers grows to 260 million. Revenue this period will be €4.1 billion, compared with estimates of €4.26 billion. The company also projects gross margin will widen to 31.8%.