Spotify (NYSE:SPOT) experienced a more than 9% increase in its share price intra-day today following the announcement of a significant workforce reduction. CEO Daniel Ek, in a post on the company’s website, described this move as a pivotal change for Spotify. He announced that around 17% of the total workforce would be cut to align the company with its future objectives and to manage operational costs effectively.

Ek noted that initially, Spotify had considered smaller workforce reductions spread over 2024 and 2025. However, the substantial gap between the company’s financial targets and its current spending necessitated a more decisive action. This step is viewed as crucial for achieving the company’s goals.

In its financial update back in October, Spotify reported an 11% increase in third-quarter revenue compared to the previous year, reaching 3.36 billion euros. The company had projected a revenue of 3.7 billion euros for the fourth quarter.

However, with the recent announcement of major job cuts, Spotify now expects to incur a loss of between 93 million and 107 million euros in the fourth quarter, a stark contrast to the previously anticipated profit of 37 million euros. This revised outlook includes charges of approximately 130 to 145 million euros, attributed to severance payments and impairment of real estate assets. These charges are expected to be primarily paid out during the first and second fiscal quarters of 2024.

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