Netflix ( NFLX ) stock opened 8% higher on Friday after the streaming giant beat third-quarter EPS and revenue estimates and posted sales for the current quarter that topped Wall Street’s expectations.
Revenue reached $9.83 billion in Q3, beating the Bloomberg consensus estimate of $9.78 billion, Netflix reported after the market closed on Thursday, up 15% from the same period last year. The growth comes as the streamer continues to lean on revenue initiatives like password sharing and a crackdown on ad-supported tiers, in addition to price hikes on some subscription plans last year.
Netflix guided for fourth-quarter revenue of $10.13 billion, a beat compared to consensus estimates of $10.01 billion.
For the full year 2025, the company expects revenue of $43 billion to $44 billion compared to consensus estimates of $43.4 billion. This would represent growth of 11% to 13% from the company’s expected 2024 revenue guidance of $38.9 billion.
After the metric reached nearly 30% in the third quarter, it expects full-year operating margins to be 27%.
Diluted earnings per share (EPS) beat estimates for the quarter, with the company reporting EPS of $5.40, beating consensus expectations by $5.16 and beating the $3.73 EPS number it reported in the prior year. Netflix guided for fourth-quarter EPS of $4.23, beating consensus calls for $3.90.
Breakout programming such as “The Perfect Couple” and “Nobody Wants This” added more than 5 million subscribers.
The 5.07 million subscriber additions beat expectations of 4.5 million and followed the streamer’s 8.05 million net additions in the second quarter. The company added 8.8 million paid users in Q3 2023.
“We expect fee net additions to be higher in Q4 than Q3’24 due to normal seasonality and stronger content,” the company said, adding that “Squid Game” Season 2, Jake Paul vs. Citing upcoming releases like the Mike Tyson fight. , and two NFL games on Christmas Day.
Investors have appreciated the company’s foray into sports and live events. Meanwhile, its ad tier continues to gain traction, with more than 50% of sign-ups in countries where it is served in the third quarter.
“We continue to build our advertising business and improve our offering to advertisers,” the company said in an earnings release. “Ads membership grew 35% in the quarter, and our ad tech platform is on track to launch in Canada in Q4 and expand even more broadly in 2025.”
Last quarter, Netflix revealed It also committed to “a 150% increase in advance ad sales commitments over 2023”. The company has Said before Its goal is to make advertising a “substantial revenue stream contributing to sustained, healthy revenue growth by 2025 and beyond.”
On the earnings call, Netflix co-CEO Greg Peters said advertising won’t be the primary driver of revenue next year, saying the company sees “we’re still scaling audiences and our ability to monetize that inventory.” “An opportunity to close that gap.”
In the lead-up to the results, Netflix’s shares tumbled, with shares up 45% since the start of the year and trading at all-time lows.
Analysts expect another price hike before the end of the year, which could be another boost for stocks. But the stock’s recent run-up has led to some trepidation on Wall Street.
Will there be a price hike?
As part of that, the company recently revealed that subscribers watched more than 94 billion hours on the platform from January to June. The latest biennial visitor reportWhile engagement levels came in roughly flat year-over-year — a potential headwind when it comes to pricing — that’s especially important for streaming companies as consumers become more engaged.
According to a recent Digital Media Trends report, on average, US consumers subscribe to four streaming services and spend about $61 per month. Deloitte. Retaining loyal subscribers over time is a challenge as consumers opt out or cancel their subscription plans.
Netflix finally raised the price of its fixed plan In January 2022Raised the monthly cost from $13.99 to $15.49. At the same time it raised the price of its premium line by $2 to $19.99; The company again raised the price of the plan last October to $22.99.
The company has yet to raise the price of its ad-supported offering, which was launched two years ago and remains one of the cheapest ad plans among all major streaming players at $6.99 a month.
“As Netflix continues to cost less per hour watched, we see the potential for U.S. prices to rise 12% in 2025,” Citi analyst Jason Bassinette said ahead of the report.
The company recently phased out its low-cost ad-free streaming plan, making the $15.49 Standard plan the cheapest offering for an ad-free experience.
Alexandra Canal Senior reporter at Yahoo Finance. Follow her on X @alli_kanal, LinkedIn, and email [email protected].
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