Look at $SPOT go!

SPOT stock surged Tuesday morning after a compelling Q4 report — just as we predicted it would.

Spotify achieved its first full year of profitability, reporting a net income of €1.14 billion for 2024, a significant turnaround from a loss of €532 million in 2023.

Key Drivers of Growth:

1. User Expansion: Monthly Active Users (MAUs) increased by 12% to 675 million, marking the strongest fourth quarter in the company's history.

2. Subscription Growth: Premium subscribers grew by 11% to 263 million, surpassing expectations.

3. Price Adjustments: Strategic subscription price increases in various regions, including the U.S., contributed to revenue growth without significantly impacting customer retention.

4. Cost Management: The company implemented cost-control measures, such as workforce reductions and streamlined podcast investments, enhancing profitability.

Massive turnaround indeed.

How did Spotify turn the corner on user growth and profitability?

It leveraged AI in all the right ways.

Spotify reduced operating expenses by using AI to automate content moderation, optimize ad targeting, and streamline backend operations. Instead of relying on manual oversight for podcast investments, AI-driven insights helped identify underperforming content, cutting costs while maintaining high-value offerings. Much lower headcount. Much higher value.

AI-powered analytics allowed Spotify to refine its subscription model by segmenting users more effectively. By analyzing listening habits and engagement trends, Spotify introduced new premium tiers tailored to different user groups, such as superfans and audiophiles. AI also played a role in strategic price hikes, ensuring that increases were implemented in markets where users were least likely to churn.

Spotify’s AI-driven personalization became a core product differentiator. Features like AI-generated playlists, improved Discover Weekly recommendations, and the AI DJ deepened engagement, keeping users locked into the platform. By dynamically adjusting content curation, AI ensured that users found more of what they loved, boosting retention and lifetime value.

Bottom line: by integrating AI into cost management, pricing strategy, and product experience, Spotify achieved sustainable profitability without sacrificing growth.

Our Core Conviction play is now up +276%.

It is not the only company that can do this. It is certainly a posterchild for success.

We have some on our watchlist now.

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