On Monday, music streaming giant Spotify revealed plans to reduce its workforce by approximately 17 percent, equating to around 1,500 employees.

This decision aims to cut costs amid a notably slower economic growth. Despite a 26 percent rise in active users to 574 million in the third quarter, leading to an unexpected quarterly net profit of €65 million in October (compared to a €166 million loss the previous year), the company is implementing these layoffs.

This move aligns with a broader trend in the tech sector, which witnessed numerous job cuts after a surge during the COVID pandemic lockdowns. AFP reported that CEO Daniel Ek sent a letter to staff that, stating, “I realised that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance.”

In 2020 and 2021, he stated that the Swedish company “took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals.”

He emphasised the shift in the current scenario, citing a “dramatic slowdown in economic growth” and the increased cost of capital. Ek mentioned that Spotify, listed on the New York Stock Exchange, exhibited increased productivity but reduced efficiency in 2022 and 2023. He emphasized the significance of striking a balance between these two aspects.

Since its inception in 2006, the company’s growth strategy has involved significant investments in expanding markets and acquiring exclusive content, notably podcasts, with podcast investments alone exceeding $1 billion.

The company’s workforce has experienced substantial growth, increasing from around 3,000 employees in 2017 to nearly 9,800 by the close of 2022. Monday’s recent announcement signifies Spotify’s third round of layoffs this year, following previous reductions of 600 jobs in January and 200 in the podcast division in June.

Ek explained in his letter, “We discussed making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”