Spotify shares surged over 7% on Monday following the announcement that the music streaming giant will be reducing its workforce by 17%. In an email to staff, CEO Daniel Ek explained the move, stating, “We are taking substantial action to rightsize our costs.” Ek acknowledged that Spotify had overexpanded its team during 2020 and 2021 when capital was abundant.

This round of layoffs, approximately 1,500 jobs, reflects Spotify’s effort to adjust to a growth slowdown. Although Spotify reported a profit of 65 million euros ($70.7 million) in the third quarter, Ek highlighted the need for the company to address economic challenges and the rising cost of capital.

Spotify announces a layoff of 17% of its workforce in its effort for profitability following Taylor’s Swift $100 million payout from song streams.

In an internal memo posted on Spotify’s website, Ek expressed the company’s commitment to becoming the world’s leading audio company while ensuring consistent profitability and growth. The layoffs come despite Spotify’s strategic moves, including subscription plan price increases and expansion into podcasts and audiobooks.

This recent workforce reduction follows previous cuts earlier in the year, with Spotify trimming 6% of its workforce in January (around 600 employees) and an additional 2% in June (approximately 200 roles). Despite these adjustments, Spotify’s shares have more than doubled in value throughout the year. Wells Fargo analysts suggest that these layoffs signal Spotify’s focus on achieving profitability targets rather than merely reacting to economic challenges, estimating a potential nearly 2% reduction in operating expenses by 2024.