Netflix (NFLX) stock rose as much as 5% in after-hours trading Thursday as the streaming giant beat third-quarter revenue and earnings per share estimates and projected sales for the current quarter surpassed estimates. Wall Street expectations.
Revenue surpassed Bloomberg consensus estimates of $9.78 billion to reach $9.83 billion in the third quarter, an increase of 15% compared to the same period last year, as the streamer continued leaning on revenue initiatives like its anti-password sharing and ad-supported tier, in addition to last year’s price increases on certain subscription plans.
Netflix posted fourth-quarter revenue of $10.13 billion, ahead of consensus estimates of $10.01 billion.
For full year 2025, the company expects revenue to reach between $43 billion and $44 billion, compared to consensus estimates of $43.4 billion. This would represent 11% to 13% growth from the company’s expected 2024 revenue guidance of $38.9 billion.
It expects full-year operating margins to reach 27%, up from 26% previously, after the metric hit 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 above the EPS figure of $3. 73 that it reported in the same period of the previous year. Netflix delivered fourth-quarter earnings per share (EPS) of $4.23, ahead of consensus expectations of $3.90.
Subscribers also increased strongly with another more than 5 million subscribers added following notable programming such as “The Perfect Couple” and “Nobody Wants This.”
The subscriber addition of 5.07 million beat expectations of 4.5 million and follows net additions of 8.05 million the streamer added in the second quarter. The company had added 8.8 million paying users in the third quarter of 2023.
“We expect paid net adds to be higher in the fourth quarter than in the third quarter of 24 due to normal seasonality and a strong content slate,” the company said, citing upcoming releases such as Season 2 of “The Squid Game.” “, the fight between Jake Paul and Mike Tyson. and two NFL games on Christmas Day.
Investors have praised the company’s foray into sports and live events. Meanwhile, its ad tier continues to gain ground, accounting for more than 50% of subscriptions in countries where it is offered during the third quarter.
“We continue to build our advertising business and improve our offering for advertisers,” the company said in the earnings release. “Ads membership is up 35% quarter over quarter, and our ad tech platform is on track to launch in Canada in Q4 and generally in 2025.”
Last quarter, Netflix revealed that it saw “a more than 150% increase in initial ad sales commitments during 2023.” The company has previously said it aims to make ads “a more substantial revenue stream that contributes to sustained, healthy revenue growth in 2025 and beyond.”
On the earnings call, Netflix co-CEO Greg Peters said that while ads won’t be the primary revenue driver next year, as “we’re still growing that audience and that inventory faster than our ability to monetize them”, the company considers it an “opportunity to close that gap.
Ahead of the results, Netflix shares had been on the rise, 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 the stock. But the recent rise in stocks has created some apprehension on Wall Street.
Price increase to come?
The company recently revealed that subscribers watched more than 94 billion hours on the platform from January to June as part of its latest bi-annual viewership report, although year-over-year engagement levels remained more or less stable, a potential headwind. when it comes to pricing power, which has become especially important for streaming companies as consumers become more demanding.
On average, American consumers subscribe to four streaming services and spend about $61 a month, according to Deloitte’s latest Digital Media Trends report. Retaining loyal subscribers over time is a challenge as consumers abandon or cancel their subscription plans.
Netflix last increased the price of its Standard plan in January 2022, increasing the monthly cost from $13.99 to $15.49. It also increased the price of its Premium tier by $2 to $19.99 per month at the same time; the company raised the cost of that plan again last October to $22.99.
The company has yet to raise the price of its ad-supported offering, introduced less than two years ago, which remains one of the cheapest ad-supported plans among all major streaming players at $6.99 per month.
“Given Netflix’s low cost per hour watched, we see room for the company to increase prices in the United States by 12% in 2025,” Citi analyst Jason Bazinet said ahead of the report.
The company recently phased out 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 her at alexandra.canal@yahoofinance.com.
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