Music streaming giant Spotify is feeling the effects of its largest-ever round of layoffs — ones it would rather skip.
Spotify chief executive Daniel Ek said its workforce reduction of 1,500 employees in December was one of the company’s major challenges in the first quarter during a call with investors after Spotify released its earnings report.
“Although there’s no question that it was the right strategic decision, it did disrupt our day-to-day operations more than we anticipated,” Ek said. “It took us some time to find our footing, but more than four months into this transition, I think we’re back on track, and I expect to continue improving on our execution throughout the year getting us to an even better place than we’ve ever been.”
The company’s stock rose almost 17% Tuesday — a 52-week high —after it beat first quarter estimates and offered a strong outlook for the second quarter. While Wall Street analysts anticipated $3.87 billion in revenue, Spotify reported $3.95 billion. The company also reported an operating income of $179 million.
But Ek said the company didn’t meet its expectations on profitability and monthly active user growth due to the layoff’s impact on operations. The number of monthly active users grew 19% to 615 million, while Spotify expected 618 million. Spotify did not immediately respond to a request for comment Wednesday morning.
After announcing layoffs of 17% of its workforce in December, Ek said he took “full accountability” for being “too ambitious in investing ahead of our revenue growth.” The December layoffs followed two other rounds of job cuts last year in January and June. Spotify also raised its prices last year to $10.99 a month from $9.99 — its first price increase in over a decade.
“Today, we still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact,” Ek said in his December layoffs memo. “More people need to be focused on delivering for our key stakeholders—creators and consumers.”