Spotify CEO says layoffs brought 'more' disruption than expected but were 'right strategic decision'

Spotify CEO Daniel Ek on Tuesday acknowledged that layoffs the audio streaming giant implemented in December affected production in the company's first quarter. 

Ek described the job cuts on Spotify’s earnings call as a "significant challenge" that the Sweden-based company contended with.

"Although there’s no question that it was the right strategic decision, it did disrupt our day-to-day operations more than we anticipated," he said.

Spotify’s layoffs in December affected roughly 1,500 workers, or 17% of the company's total workforce. 

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Ek told employees in December that the workforce reduction was meant to "align Spotify with our future goals and ensure we are right-sized for the challenges ahead." He also said at the time that the company’s cost structure "for where we need to be is still too big" despite other initiatives to reduce costs.

The company had earlier cut about 800 jobs across two rounds of layoffs that occurred in January and June 2023, respectively, as previously reported by FOX Business.

Ek acknowledged on Tuesday that it "took us some time to find our footing" after the most recent headcount reduction "but more than four months into this transition, I think we’re back on track."

"I expect to continue improving on our execution throughout the year, getting us to an even better place than we’ve ever been," he told analysts and investors.

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Spotify previously issued guidance that it expected to have 618 million total monthly active users in the first quarter. The figure totaled 615 million MAUs.

Overall, Spotify had a "solid quarter driven by strong revenue growth, expanding gross margin and the largest operating income we’ve ever posted," Ek said.

On top of the layoffs, Ek pointed to 2023’s MAU growth as a factor that contributed to the company not hitting its MAU growth goal in the first quarter.

"The MAU and subscription growth we achieved in 2023 not only surpassed our most ambitious forecast, but also set a record for the most significant user growth in Spotify’s history," he said. "While we anticipate continuous robust growth going forward, 2023 was a truly standout year and should not be a based on expectation for every subsequent year."

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Spotify also "probably pulled back too significantly" on its marketing spending in 2023, something Ek said the audio streaming giant was "already correcting" in the second quarter.

In the second quarter, the company anticipated it would see 3.8 billion euros (about $4 billion) in revenue and 250 million euros (about $267 million) in operating income.