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Investors are closely monitoring Netflix’s recent success as the streaming service’s earnings and subscriber growth continue to exceed expectations. Netflix (NFLX) saw its stock price surge by over 8% on Friday after the company reported strong third-quarter earnings and revenue figures, as well as optimistic sales projections for the current quarter that exceeded Wall Street’s forecasts.
During the third quarter, Netflix reported a 15% increase in revenue compared to the same period last year, surpassing the $9.78 billion consensus estimate from Bloomberg with revenue totaling $9.83 billion. Alongside previous price increases on select subscription plans from the past year, the company has been implementing revenue initiatives such as restrictions on password sharing and the introduction of an ad-supported tier to drive growth.
Looking ahead, Netflix anticipates revenue of $10.13 billion in the upcoming fourth quarter, a figure that surpasses the consensus estimate of $10.01 billion. Furthermore, the company projects revenue for the full year of 2025 to range between $43 billion and $44 billion, exceeding the $43.4 billion consensus estimate. This would represent an 11% to 13% increase from the anticipated 2024 revenue guidance of $38.9 billion.
Netflix is also expecting that full-year operating margins will reach 27%, up from the previous quarter’s 26% increase following a nearly 30% surge in the third quarter. The company reported diluted earnings per share (EPS) of $5.40 in the quarter, surpassing the consensus expectation of $5.16 and significantly rising from the $3.73 EPS reported in the same quarter last year. For the fourth quarter, Netflix anticipates earnings per share of $4.23, exceeding the consensus estimate of $3.90.
The streaming giant has continued to attract more subscribers, with an additional 5 million joining during the latest quarter driven by hit shows like “The Perfect Couple” and “Nobody Wants This.” This follows the 8.05 million net additions in the second quarter, exceeding expectations of 4.5 million. In the third quarter of 2023 alone, Netflix acquired 8.8 million paying subscribers.
Netflix is optimistic about its future subscriber growth, stating, “We anticipate that paid net additions will be higher in Q4 than in Q3’24 due to a strong content slate and typical seasonality.” The company highlighted upcoming releases like “Squid Game” Season 2, the Jake Paul vs. Mike Tyson fight, and two NFL games on Christmas Day as potential drivers of subscriber growth.
Investors have praised Netflix’s expansion into live events and sports, as well as the success of its ad-supported tier, which accounted for over 50% of sign-ups in countries where it was available during the third quarter. The company remains committed to growing its advertising business and enhancing offerings for advertisers, noting that ads membership was up 35% quarter on quarter. Netflix’s ad tech platform is set to launch in Canada in Q4 and expand more broadly in 2025.
In conclusion, Netflix’s strong earnings and subscriber growth are positioning the company for further success in the streaming industry. With a robust content slate, expansion into live events, and a growing advertising business, Netflix is well-positioned for continued growth in the coming years. The company’s ability to exceed expectations and drive subscriber growth is attracting investor interest and positioning Netflix as a leader in the streaming space.
