The music streaming giant, Spotify has announced a drastic workforce reduction of 17%, citing the need to cut costs as the global economy grapples with slower growth.

The move comes surprisingly on the heels of a rare quarterly profit of 32 million euros in October, a stark contrast to the 228 million euro loss they suffered a year prior. This positive profit was largely attributed to a 26% surge in active users during the third quarter.

In a letter to employees obtained by AFP, CEO Daniel Ek acknowledged the “surprisingly large” size of the layoffs given the recent positive earnings. 

He explained that the company had aggressively “invested in team expansion, content enhancement, marketing, and new verticals” in 2020 and 2021, capitalizing on low-cost capital and a booming market.

However, Ek admitted, “we now find ourselves in a very different environment.” 

Despite cost-cutting efforts throughout 2023, Spotify’s current cost structure “is still too big” for the challenging economic landscape.

Since its early days, Spotify has prioritized aggressive expansion, entering new markets and heavily investing in exclusive content, particularly podcasts. Their podcast investments alone have surpassed a staggering $1 billion.

This growth strategy fueled a dramatic workforce expansion, with Spotify’s employee count soaring from around 3,000 in 2017 to nearly 9,800 by the end of 2022.

Despite dominating the online music space, Spotify has never achieved a full-year net profit and has only occasionally reported quarterly profits.