Spotify cuts 17% workforce to reduce costs, improve profitability

Music streaming major Spotify has laid off 17% of its workforce to reduce costs and improve profitability in its largest headcount reduction this year.

In a recent communication addressed to all Spotify employees, CEO Daniel Ek highlighted the challenges posed by a sluggish economic environment and increased capital costs, issues not unique to Spotify.

This marks the music-streaming giant's third round of layoffs this year. In January, the company declared its intention to reduce its workforce by 6%, leading to the termination of approximately 600 employees. Subsequently, in June, the company said it would downsize its podcast division by 200 positions.

"And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big," Ek said in a blog. "To be blunt, many smart, talented and hard-working people will be departing us."

Spotify announced its first profitable quarter in more than a year in its earnings report. In the July-September quarter, the company reported an 11% increase in revenues, reaching $3.6 billion, alongside an operating income of approximately $34 million.

The company saw a notable growth in monthly active users, with an addition of 23 million year-over-year, reaching a total of 574 million. There was also a significant uptick in paid subscribers—rising by 6 million, a 16% increase.

"I realise that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance. We debated making smaller reductions throughout 2024 and 2025." CEO Daniel Ek said.

"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 added