Spotify Technology SA on Monday said it plans to reduce head count by 17%, which would mark the third time the audio streaming group has announced layoffs cuts this year.
The Wall Street Journal said the cuts would equate to about 1,500 jobs.
The move was announced by Chief Executive Officer Daniel Elk in a letter to employees that was posted on the company’s website.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” he said, adding that the “painful” cuts were needed to align the company with “future goals and ensure we are right-sized for the challenges ahead.”
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previously announced 200 workers would be laid off in June and 600 workers in January.
Elk said that he realized the new reductions seem “surprisingly large, given the recent positive earnings report and the company’s performance” — shares have soared 128% in 2023. Shares of Spotify rose 2.3% in premarket trading on Monday.
Analysts have credited Spotify’s share performance this year to strong growth and improved profitability, but Citi downgraded the stock last week, saying risk-reward is no longer attractive.
“We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives,” he said.
Elk explained that in 2020 and 2021, Spotify took advantage of lower costs of capital and “invested significantly,” for example in expanding the company’s team and enhancing conent.
“These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year. However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big,” he said.
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