Spotify Technology SA’s third-quarter subscriber growth exceeded investors’ expectations, although the music streaming giant guided toward a lower profit margin in the current period as it continues investments in programming and product enhancements.

The company, based in Stockholm, reported 456 million monthly average users in the quarter, beating analysts’ projections of 450.7 million. It surpassed paid subscriber predictions as well, confirming some investors’ beliefs that the business can weather a shaky economy and inflationary environment.

Spotify’s ad revenue increased 19%, but the company said this was slower than expected due to a “challenging macro environment.” 

Spotify began selling audiobooks through the platform in September in an effort to enter the “substantially untapped” market, according to Nir Zicherman, global head of audiobooks and gated content.

The company generated 385 million euros in advertising sales in the quarter, representing 13% of its revenue. That business has been a focus for the company, as it is at other streaming services.

Spotify continues to wrestle with its podcasting business, terminating employees at its Gimlet Media and Parcast studios this month, following layoffs of other podcast staff in September. 

Third-quarter revenue reached 3.04 billion euros ($3.03 billion), exceeding analysts’ expectations of 3.02 billion euros.

Paid subscribers totaled 195 million, beating Wall Street projections of 194.2 million.

Gross margin failed to meet analysts’ 25.2% estimate, coming in at 24.7%, which Spotify attributed to the ad slowdown and increased content spending. The company forecast a gross margin of 24.5% in the fourth quarter, and an operating loss of 300 million euros, both below consensus expectations.

—Bloomberg News