Netflix ( NFLX ) stock rose as much as 5% in after-hours trading on Thursday, as the streaming giant beat third-quarter EPS, revenue and projected sales estimates for the current quarter that came in ahead of Wall Street expectations.
Revenue surpassed Bloomberg’s consensus estimate of $9.78 billion to reach $9.83 billion in the third quarter, up 15% from the same period last year, as the streaming company continued to lean on revenue initiatives such as its crackdown on password sharing and its ad-supported tier, in addition to… Price hikes last year on certain subscription plans.
Netflix guided for Q4 revenue of $10.13 billion, which represented a beat compared to the consensus estimate of $10.01 billion.
For all of 2025, the company expects revenue to reach between $43 billion and $44 billion compared to the consensus estimate of $43.4 billion. This would represent 11% to 13% growth from the company’s expected 2024 revenue of $38.9 billion.
It expects full-year operating margins to reach 27%, up from the previous 26%, after the metric reached nearly 30% in the third quarter.
Diluted earnings per share (EPS) also beat estimates in the quarter, with the company reporting EPS of $5.40, above consensus expectations of $5.16 and well ahead of the EPS figure of $3.73 it reported in the same period of the year. the past. Netflix guided for Q4 EPS of $4.23, ahead of consensus calls for $3.90.
Subscribers also came in strong with over 5 million more subscribers added on the heels of spin-offs like “The Perfect Couple” and “Nobody Wants This.”
Subscriber additions of 5.07 million exceeded expectations of 4.5 million and tracked the net additions of 8.05 million added by the operator in the second quarter. The company added 8.8 million paid users in the third quarter of 2023.
“We expect paid net additions in Q4 to be higher than in Q3 2024 due to normal seasonality and a strong content slate,” the company said, citing upcoming releases like Squid Game Season 2, and the Jake Paul vs. Mike Tyson. and two NFL games on Christmas Day.
The company’s foray into sports and live events has been praised by investors. Meanwhile, the ad layer continues to gain traction, accounting for more than 50% of subscriptions in the countries where it is displayed during the third quarter.
“We continue to build our advertising business and improve our offerings to advertisers,” the company said in the earnings release. “Ad membership is up 35% QoQ, and our ad tech platform is on track to launch in Canada in Q4 and more broadly in 2025.”
last quarter, Netflix revealed It received a “150% increase in ad sales commitments made through 2023.” The company has He said previously Its goal is to make advertising “a greater revenue source that contributes to sustainable and healthy revenue growth in 2025 and beyond.”
On the earnings call, Netflix co-CEO Greg Peters said that while advertising won’t be the main revenue driver next year, “we’re still expanding that audience and that inventory faster than we can monetize it.” As the company sees it. “An opportunity to bridge this gap.”
In the run-up to the results, Netflix stock has been on a tear, with shares up about 45% since the beginning of the year and trading near all-time highs.
Analysts expect another price rise by the end of the year, which will likely serve as another catalyst for stocks. But the stock’s recent rise has led to some concerns on Wall Street.
Price hike coming?
The company recently revealed that subscribers watched more than 94 billion hours on the platform from January to June as part of its program. Latest semi-annual report to watchalthough year-over-year engagement levels have been roughly flat — a potential headwind when it comes to pricing power, which is becoming especially important for streaming companies as consumers become more selective.
On average, American consumers subscribe to four streaming services and spend about $61 a month, according to the latest digital media trends report from Deloitte. Retaining loyal subscribers over time is a challenge due to consumers dropping or canceling their subscription plans.
Netflix recently raised the price of its Standard plan In January 2022which brings the monthly cost to $15.49 from $13.99. It also raised the price of the premium tier by $2 to $19.99 per month at the same time; The company again raised the cost of that plan last October to $22.99.
The company has yet to raise the price of its ad-supported offering, which was introduced less than two years ago, and which remains one of the cheapest ad plans among all major streaming players at $6.99 per month.
“Given Netflix’s low cost per viewing hour, we see room for the company to raise prices in the US by 12% in 2025,” Citi analyst Jason Bazinet said ahead of the report.
The company recently ditched its lowest-priced ad-free streaming plan, making the $15.49 Standard plan its cheapest offering for an ad-free experience.
Alexandra Canal He is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, And email it to alexandra.canal@yahoofinance.com.
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