Spotify (NYSE:SPOT) shares rose more than 1.5% in pre-market trade on Monday after the company announced it will cut approximately 17% of its total workforce.
In an update on the company’s website, CEO Daniel Ek said the decision marks “a significant step change for our company.”
“To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company,” he said in a post.
According to Ek, Spotify contemplated implementing smaller workforce reductions over the course of 2024 and 2025.
However, in light of the significant disparity between the company's financial goal state and its current operational costs, CEO Ek decided that a substantial action to rightsize costs was the most effective option to achieve the company's objectives.
Back in October, Spotify said its third-quarter revenue rose 11% year-over-year to 3.36 billion euros. For this quarter, the company expects to generate 3.7 billion in Q3 revenue.
Following the announcement of major job cuts, Spotify said it now anticipates incurring a loss of 93 million euros to 107 million euros in the fourth quarter. It previously saw a profit of 37 million euros.
This revision is attributed to charges totaling approximately 130 million euros to EU145 million euros, covering severance-related payments and the impairment of real estate assets.
The majority of the cash component for these charges is expected to occur in the first and second fiscal quarters of 2024.