Spotify Technology SA revealed on Monday its intention to reduce its headcount by 17%, marking the third round of layoffs within this year for the audio streaming giant.
According to The Wall Street Journal, this restructuring move would result in approximately 1,500 job cuts.
Chief Executive Officer Daniel Elk shared this news through a letter posted on the company’s official website. In the communication, Elk cited the dramatic slowdown in economic growth and the increased cost of capital, stating that these factors necessitated painful adjustments to align the company with its future goals.
Earlier this year, Spotify had already announced two rounds of layoffs, with 200 workers being let go in June and 600 in January.
Elk acknowledged that the latest round of reductions may appear surprisingly large, especially looking at the recent positive earnings report and the company’s performance. The share prices have surged by an impressive 128% in 2023.
While analysts credited Spotify’s stock performance to robust growth and improved profitability, Citi downgraded the stock last week, citing diminished attractiveness in terms of risk-reward ratio.
Elk deliberated over implementing smaller reductions gradually throughout 2024 and 2025. However, considering the gap between the company’s financial goal state and its current operational costs, he concluded that substantial action to rightsize costs was the most effective approach to achieving their objectives.
Elaborating on the rationale behind this decision, Elk explained that Spotify had taken advantage of lower capital costs in 2020 and 2021 to make significant investments, such as expanding the team and enhancing content offerings.
Although these investments had yielded positive results, contributing to the platform’s robust growth, Elk highlighted that the present environment is drastically different. Despite efforts to reduce costs over the past year, the current cost structure remains excessive for the desired state of the company.
The outlined workforce reductions are a clear indication of the commitment Spotify is making to realign its operations and ensure future success in a challenging landscape.
