Spotify (SPOT) is jumping higher in the premarket even after a run up of almost 60% year-to-date, and despite reporting 2Q revenue that missed expectations. Monthly active users rose 14% to 626 million, with premium subscribers and revenue up 12% and 21%, respectively, and ad-support revenue up 13%. Subscriber net adds of 7 million beat guidance by a staggering 1 million.

The Street appears to be rewarding Spotify as it solidifies its dominance in the music streaming industry and adds other forms of audio entertainment, especially audiobooks and podcasts. Over the past few years, it signed huge deals with popular creators like Joe Rogan and Alex Cooper for their podcasts to take market share from Apple (AAPL), another huge podcast platform. Now, with that leg of the plan paying off, Spotify says it plans to focus on distribution rather than exclusivity with the aim of improving profit margins.

Spotify also raised prices this year and last year on some of its plans and is splitting its content up in different ways to entice consumers with different bundles, such as an audiobook-only tier or combining music, audiobooks, and podcasts. While it said in 2023 that “historical price increases have had minimal impact” on subscriber growth, the aim to squeeze every penny of profit out could begin to alienate consumers, and it will eventually saturate its listening markets. How can Spotify keep improving its experience to win loyalty? What will the market do the first time in this upward trajectory it misses subscriber growth expectations? Tune into Schwab Network for earnings discussions and more every weekday.

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