Netflix Soars as Q3 Earnings Smash Expectations
The streaming giant’s stock surged as much as 5% in after-hours trading Thursday, driven by impressive third-quarter earnings that beat Wall Street estimates. Revenue hit $9.83 billion, a 15% increase from the same period last year, thanks to successful initiatives like password sharing crackdowns and its ad-supported tier.
Revenue Growth on Track
Netflix projected sales for the current quarter to reach $10.13 billion, exceeding consensus estimates of $10.01 billion. For full-year 2025, the company expects revenue to hit between $43 billion and $44 billion, representing growth of 11% to 13% from its expected 2024 revenue guidance of $38.9 billion.
Earnings Per Share Beat Estimates
Diluted earnings per share (EPS) also exceeded expectations, with the company reporting EPS of $5.40, above consensus estimates of $5.16 and significantly higher than the $3.73 EPS figure reported in the year-ago period. Netflix guided to fourth-quarter EPS of $4.23, ahead of consensus calls for $3.90.
Subscriber Growth Strong
The company added 5.07 million subscribers, beating expectations of 4.5 million, driven by popular programming like “The Perfect Couple” and “Nobody Wants This.” Netflix expects paid net additions to be higher in Q4 due to normal seasonality and a strong content slate, including upcoming releases like “Squid Game” season 2 and two NFL games on Christmas Day.
Ad Tier Gains Traction
The company’s ad tier continues to gain momentum, with ads membership up 35% quarter over quarter. Netflix’s ad tech platform is set to launch in Canada in Q4 and more broadly in 2025. The company aims to make ads a substantial revenue stream contributing to sustained, healthy revenue growth in 2025 and beyond.
Pricing Power a Key Challenge
As consumers become increasingly picky, retaining loyal subscribers is a significant challenge for streaming companies. Netflix last raised the price of its Standard plan in January 2022 and may consider another price hike by the end of the year, which could serve as a catalyst for shares. However, the company needs to balance pricing power with subscriber retention, as US consumers subscribe to an average of four streaming services and spend around $61 per month.
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