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Investors around the globe are carefully monitoring potential price increases as Netflix’s earnings and subscriber growth have surpassed estimates. The streaming giant, Netflix (NFLX), experienced a remarkable surge in its stock price of over 8% on Friday following its exceptional performance in the third quarter.
Netflix reported a remarkable 15% increase in revenue compared to the same period last year, reaching $9.83 billion, which exceeded the $9.78 billion consensus estimate from Bloomberg. The company’s revenue growth can be attributed to several factors, including price increases on specific subscription plans implemented last year. Netflix also continued to explore revenue initiatives such as restricting password sharing and introducing an ad-supported tier to drive further growth.
The streaming giant’s positive momentum is expected to continue into the fourth quarter, with projected revenue of $10.13 billion, surpassing the consensus estimate of $10.01 billion. Looking ahead, Netflix anticipates revenue for the full year of 2025 to be between $43 billion and $44 billion, compared to the consensus estimate of $43.4 billion. This would represent an 11% to 13% increase from the company’s anticipated 2024 revenue guidance of $38.9 billion.
Netflix is also optimistic about its operating margins, with expectations of reaching 27% by the end of the full year, a slight increase from the previous margin of 26%. The company’s diluted earnings per share (EPS) for the quarter also exceeded expectations, coming in at $5.40 compared to the consensus expectation of $5.16. This represents a significant increase from the $3.73 EPS reported in the same quarter the previous year. Netflix anticipates fourth-quarter earnings per share of $4.23, surpassing the consensus estimate of $3.90.
Alongside the impressive financial performance, Netflix also saw significant growth in its subscriber base. The addition of 5 million subscribers in the third quarter, following the 8.05 million net additions in the second quarter, exceeded expectations and showcased the popularity of hit programs like “The Perfect Couple” and “Nobody Wants This.” In total, the organization acquired 8.8 million paying subscribers in the third quarter of 2023.
Looking ahead, Netflix remains bullish on its subscriber growth, stating that it anticipates paid net additions to be even higher in the fourth quarter than in the third quarter of 2024 due to a robust content slate and typical seasonal trends. The company highlighted upcoming releases such as “Squid Game” Season 2, the Jake Paul vs. Mike Tyson fight, and the two NFL games scheduled for Christmas Day.
Investors have praised Netflix’s expansion into live events and sports, as well as the continued growth of its ad tier, which accounted for more than 50% of sign-ups in countries where it was available during the third quarter. The company has signaled its commitment to growing its advertising business and enhancing offerings for advertisers, with plans to launch its ad tech platform in Canada in the fourth quarter and more broadly in 2025.
In conclusion, Netflix’s outstanding performance in the third quarter has generated significant excitement among investors, who are eagerly anticipating further growth in earnings and subscribers in the coming months. With its strategic revenue initiatives and strong content lineup, Netflix is well-positioned to continue its impressive trajectory and solidify its position as a leading player in the streaming industry.
