Spotify expects to reach $100 billion in annual revenue in 10 years; nearly 10-fold from its current revenue of $11.4 billion

While tech companies are still reeling from a wave of layoffs and hiring freeze, music streaming giant Spotify said on Wednesday that it expects to reach $100 billion in annual revenue, nearly 10-fold from its 2021 revenue of $11.4 billion.

Since its inception about two decades ago, the music streaming behemoth has seen explosive growth in revenue and a customer base of over 400 million monthly active users, including over 160 million premium subscribers. The further incentivised its customers, Spotify promised high-margin returns from its costly expansion into podcasts and audiobooks.

To reach this ambitious goal, Spotify is already expanding beyond music streaming through acquisitions and massive investments in podcasting and exclusive contracts. Founder and CEO Daniel Ek forecasts the company’s gross margins to jump to 40% and operating margin to 20% during the period.

Despite the alarm of recession and inflation, Spotify continues to add users and paying subscribers. In the first quarter alone, Spotify reported 422 million monthly users, ahead of the consensus estimate.

However, one of the challenges the company faced for not reaching its long-term goals was its aggressive spending to build up its podcast and audiobooks platforms. However, Ek said the recent acquisitions and investments are already paying off adding that they are performing “better than you probably expect,” with gross margins of 28.5%, well on its way to reaching the company’s 30%-35% long-term goal.

Now Ek is trying to reset Wall Street’s perceptions of the company. In a nearly four-hour investor presentation, Ek said some may think “we’re a bad business or at least a business with bad margins for the foreseeable future.” He added, “Spotify will put out these pretty audacious targets and we are going after these because that’s how we see the world and we are going to invest behind that.”

With billions of dollars war chest, Spotify is trying to expand beyond music streaming services through acquisitions and massive investments. Unlike previous acquisitions of companies like Tunigo, Seed Scientific, Cord Project, Soundwave, and CrowdAlbum in 2016, Spotify made its foray into live audio programming, podcasting, and exclusive contracts.

Spotify engineering manager Alexander Nordstrom said the company is also planning to enter new types of content over the next 10 years that would boost its average revenue per user. He added that the company was on track to hit its goal of 1 billion users by 2030.

Spotify was founded in 2006 by Daniel Ek and Martin Lorentzon.