Spotify's Bold Move - CEO Announces Drastic 17% Workforce Cut

KEY POINTS

i. Spotify to cut headcount by 17% amid economic challenges, aiming for a leaner, more efficient structure for future growth.
ii. CEO Daniel Ek emphasizes strategic investment and resourcefulness.

Spotify Technology S.A. CEO Daniel Ek announced significant organizational changes, including reducing the company's headcount by approximately 17%. The decision reflects the economic slowdown and the need for Spotify to align with future goals and challenges. Despite recent positive earnings, the cost structure remains too high, prompting this substantial downsizing decision.

In October, Spotify reported third-quarter FY23 revenue growth of 11% year-on-year to €3.36 billion ($3.65 billion), beating the consensus of $3.34 billion. EPS of €0.33 or $0.36 beat the consensus loss of $(0.22).

Ek emphasized that while Spotify's investments in team expansion and content enhancement have driven growth, the company needs to be more efficient and resourceful.

Affected employees will receive a calendar invite for one-on-one discussions, with severance details including an average of five months' pay, payout of unused vacation, healthcare coverage during severance, and immigration support.

Additionally, impacted staff will have access to outplacement services. Ek acknowledged the pain this decision will cause but emphasized the need for a leaner, more efficient structure to invest strategically in the business.

In June, Spotify disclosed the decision to cut its headcount by 200 employees in the global podcast vertical and other functions, representing 2% of the company's workforce. The stock has gained 121% year-to-date.

Price Momentum
SPOT is trading near the top of its 52-week range and above its 200-day simple moving average.

What does this mean?
Investors have been pushing the share price higher, and the stock still appears to have upward momentum. This is a positive sign for the stock's future value.