Netflix’s stock surged 11% following its third-quarter earnings report, which surpassed Wall Street expectations on both earnings and revenue, marking another milestone in what has been a strong year for the streaming giant. The company’s stock has risen by more than 60% this year, setting a new all-time high above $760.
For the quarter ending September 30, Netflix posted earnings per share of $5.40, beating analyst expectations of $5.12. The company reported $9.83 billion in revenue, exceeding the $9.77 billion forecast. This represents a 15% year-over-year increase from the $8.5 billion in the third quarter of 2023. Despite the positive earnings, Netflix’s subscriber growth has shown signs of slowing down. The company added just over 5 million paid subscribers during the quarter, a decline from the 8 million added in the previous quarter and 8.76 million during the same period last year.
Globally, Netflix’s subscriber base reached 282 million, an increase of approximately 14% compared to the same quarter last year, when it had 247 million subscribers. However, the pace of subscriber additions has started to decelerate, with much of the company’s recent growth coming from its crackdown on password sharing and the introduction of a lower-cost ad-supported tier. These initiatives have been key drivers of the company’s success over the past year, pushing Netflix’s stock to record highs.
The company has shifted its focus away from relying solely on subscriber growth as its primary metric of success. Netflix has indicated it will stop reporting subscriber numbers after 2025, encouraging investors to focus on revenue and margins instead. This move is part of a broader strategy to sustain profitability and emphasize long-term business fundamentals over the short-term fluctuations of subscriber numbers. The shift has been welcomed by some market observers who view Netflix’s ability to continue growing its revenue as a more important indicator of its future prospects.
One area where Netflix has seen significant momentum is its ad-supported membership tier, which jumped 35% quarter-over-quarter. This tier accounted for over 50% of new sign-ups in regions where it is available, signaling strong demand for a more affordable option in the increasingly competitive streaming market. The company does not expect ad revenue to become a major driver of growth until 2026, but its early success in this area bodes well for its future strategy. Netflix’s ad-supported tier, combined with its crackdown on password sharing, has helped the company maintain its edge in an industry where content churn and subscriber retention remain critical challenges.
Netflix’s outlook for the fourth quarter and beyond remains optimistic. The company expects revenue for the fourth quarter to rise by 14.7% to $10.13 billion, and it has provided guidance for 2025, projecting revenue between $43 billion and $44 billion. This would represent growth of 11% to 13% from its expected 2024 revenue of $38.9 billion. Analysts are viewing this forecast as a positive signal, with many noting that Netflix’s outlook exceeded expectations for the near term.
One of the key factors driving Netflix’s success has been its continued investment in content. Even as other media companies have scaled back on spending due to industry-wide challenges, Netflix has remained committed to producing new and engaging shows. Notable releases in the third quarter included new seasons of popular series like Emily in Paris and The Perfect Couple. The company also has significant content lined up for the final quarter of the year, including the return of Squid Game, its most popular series to date. This commitment to content production has allowed Netflix to stay ahead of its competitors in the streaming market, where keeping subscribers engaged with fresh offerings is essential.
In addition to its traditional offerings, Netflix is expanding into new areas such as live sports. The company has secured deals to stream NFL games, including two matches on Christmas Day, and a boxing match between former champion Mike Tyson and social media personality Jake Paul. These ventures are expected to attract more subscribers, particularly to its ad-supported tier, as the company continues to explore ways to diversify its content and revenue streams.
Despite the positive performance, challenges remain for Netflix and the broader streaming industry. The global streaming market has become increasingly saturated, and competition among major players such as Disney, Amazon, and Warner Bros. Discovery is fierce. Many companies are facing profitability challenges as they struggle to balance content creation costs with subscriber acquisition and retention. Netflix, however, appears to have successfully navigated these challenges thus far by implementing innovative strategies like the password-sharing crackdown and the ad-supported tier.
Looking ahead, Netflix’s ability to maintain its leadership position in the streaming market will depend on its ability to continue delivering high-quality content while effectively managing costs. The company’s strategic pivot toward emphasizing revenue growth and profitability over subscriber numbers reflects a broader industry trend where long-term sustainability is becoming more important than short-term gains. With its strong financial performance, continued investment in content, and expansion into new areas like live sports, Netflix is well-positioned to remain the dominant force in the streaming industry for the foreseeable future.
As the company enters the final quarter of 2024, all eyes will be on its performance, particularly in light of its ambitious content lineup and its push into new markets. Netflix’s ability to sustain its growth and navigate the evolving media landscape will be crucial as it faces increasing competition from other streaming services and traditional media companies alike.
