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Spotify’s Q3 Revenue Points to Full Year Growth of 40%

Spotify generated a billion euros ($1.2 billion) in revenue in the third quarter of 2017, according to two investors briefed on the numbers. That puts it on track for full year revenue of more than four billion euros, up about 40% from 2016. And it would continue a streak of fast growth as Spotify readies for one of the highest-valued tech public listings in recent years.

Where Spotify may not be improving as quickly is on its bottom line. The company had an operating loss of between 70 million and 90 million euros in the third quarter, according to the investors. That suggests the full year operating losses will top 300 million euros, as they did the previous year. The company must convince investors it will continue to grow quickly and improve margins in order to justify a valuation on the public markets of more than $20 billion, a price that it has been fetching in some private stock transactions in recent months.

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Other data suggests that Spotify’s U.S. consumer revenue growth slowed last year, before picking up in the fourth quarter. Its U.S. sales to consumers, which primarily comes from subscriptions but also includes other sales such as merchandise, rose 38% last year, down from 44% in 2016, according to a sample of consumer credit card data from Second Measure. The firm estimated that fourth-quarter growth was back up to 42%. Another bright spot is that Spotify’s one-year customer retention in the U.S. rose to 71% in the fourth quarter of 2017, up from 64% a year earlier, according to Second Measure.

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Credit card transaction data from one research firm points to a strong fourth quarter, showing an uptick in U.S. subscriber revenue growth to 42%.