Netflix saw subscriber growth of upto 5.1 million streaming in the Q3, topping Wall Street estimates by more than 1 million. Netflix said it expected higher customer rise around the holidays when Korean drama “Squid Game” returns. Netflix delivered Q3 earnings results above Wall Street expectations in many categories.
Total revenue of Netflix was around $9.825 billion higher than analysts’ consensus expectation for $9.77 billion. Shares of Netflix rose 4.8% in after-hours trading on Thursday following the earnings report. The shares have gained about 47% so far this year.
Netflix to stop reporting subscriber data
As the pace of subscriber addition slows, Netflix has been trying to shift investor attention away from sign-ups to metrics including revenue growth and profit margins. It will stop reporting subscriber data from next year, and is touting growth in its ad-supported plans.
Netflix’s customers rise
The streaming giant said on Thursday its ad-supported service accounted for more than 50% of signups in the Q3 in countries where it was available.
Wall Street had expected Netflix to bring in 4 million subscribers from July through September, according to analysts’ estimates compiled by LSEG. New programming during the period included murder mystery “The Perfect Couple” and romantic comedy “Nobody Wants This.”
Netflix earnings report
Netflix earned $5.40 per share in the quarter, above the consensus forecast of $5.12. Operating margin hit 30% in the quarter, compared with 22% a year earlier.
Revenue of Netflix rose to $9.825 billion, just ahead of the $9.769 billion consensus forecast.
“On the surface, Netflix is trending in all the right directions,” said Forrester analyst Mike Proulx. “Financially, revenue and operating margins continue to increase and expenses are down.”
Netflix’s outlook concerning
While the customer rise outpaced forecasts, they were below the 8.76 million that Netflix picked up in 2023 quarter.
“A steep decline in net new subscribers is what’s concerning. While there’s room for net subscriber growth internationally, in the U.S. things are getting tapped out,” Proulx said.
Netflix projected its customer additions for the last three months of the year would outpace the September quarter, though it did not provide a number.
“We’re feeling really good about the business,” Co-CEO Ted Sarandos said in a post-earnings video. “We had a plan to re-accelerate the business, and we delivered on that plan.”
Netflix ad growth
The company said its programming volume had picked up following disruptions from last year’s Hollywood strikes. While Netflix has reported subscriber gains in its ad-supported tier, it does not expect advertising to become a primary growth driver until 2026.
Part of the plan centers around live events including sports, a big draw for advertisers.
No discount bundle
The company also plans to increase prices in Spain and Italy on Friday. Earlier this month, it raised prices in a few European markets and in Japan.
Sarandos has rejected the idea of adding Netflix to a discounted bundle with other streaming services such as Walt Disney and Warner Bros Discovery.
“What we’re focused on is adding more and more value to this package,” Sarandos said on Thursday, calling this a “comfortable model” for traditional media companies.
Netflix stock update
Share price of Netflix rose to $722.25 up 5.03% in after-hours trading on Thursday following the earnings report.
