Spotify grew its revenue to $3.5 billion last year, and will pay music labels billions over the next 2 years

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Spotify CEO Daniel Ek.

Music streaming service Spotify's operating loss widened in 2016 but revenue rose significantly, the company said in its annual financial statement, ahead of a possible stock market listing before the end of next year.

Spotify, which has been the subject of intense speculation about a potential direct listing on the New York Stock Exchange, made an operating loss of $389 million (349 million euros) in 2016, compared to a $263 million (236 million euro) loss the previous year.

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"This is explained by substantial investments that have been made during the year, mostly in product development, international expansion, and a general increase in personnel," Spotify's Luxembourg-based holding company wrote in its regulatory filing on Thursday.

Spotify raised $1 billion in debt financing in March 2016 and it plans to pay record labels approximately 2 billion euros in royalty payments over the next two years, according to the filing.

Revenue rose to roughly $3.5 billion (2.93 billion euros) from roughly $2.15 billion (1.93 billion euros). The company revealed that it has 140 million monthly users on Thursday, up from 126 million at the end of 2016.

Spotify could be floated within a year, a source familiar with the matter told Reuters this month.