Netflix (NFLX) stock rose as much as 5% in after-hours trading Thursday because the streaming giant beat third quarter EPS and revenue estimates and projected sales for the present quarter that got here in ahead of Wall Street’s expectations.
Revenue beat Bloomberg consensus estimates of $9.78 billion to hit $9.83 billion in Q3, a rise of 15% in comparison with the identical period last 12 months, because the streamer continued to lean on revenue initiatives like its crackdown on password sharing and ad-supported tier, along with last 12 months’s price hikes on certain subscription plans.
Netflix guided to fourth quarter revenue of $10.13 billion, a beat in comparison with consensus estimates of $10.01 billion.
For full-year 2025, the corporate sees revenue hitting between $43 billion and $44 billion in comparison with consensus estimates of $43.4 billion. This is able to represent growth of 11% to 13% from the corporate’s expected 2024 revenue guidance of $38.9 billion.
Diluted earnings per share (EPS) also beat estimates within the quarter with the corporate reporting EPS of $5.40, above consensus expectations of $5.16 and well ahead of the $3.73 EPS figure it reported within the year-ago period. Netflix guided to fourth quarter EPS of $4.23, ahead of consensus calls for $3.90.
Subscribers also got here in strong with one other 5 million-plus subscribers added on the heels of breakout programming like “The Perfect Couple” and “No one Wants This.”
Subscriber additions of 5.07 million beat expectations of 4.5 million and follows the 8.05 million net additions the streamer added within the second quarter. The corporate had added 8.8 million paying users in Q3 2023.
“We expect paid net additions to be higher in Q4 than in Q3’24 as a result of normal seasonality and a robust content slate,” the corporate said, citing upcoming releases like “Squid Game” season 2, the Jake Paul vs. Mike Tyson fight, and two NFL games on Christmas Day.
Investors have praised the corporate’s foray into sports and live events. Meanwhile, its ad tier continues to realize traction.
“We proceed to construct our promoting business and improve our offering for advertisers,” the corporate said within the earnings release. “Ads membership was up 35% quarter on quarter, and our ad tech platform is heading in the right direction to launch in Canada in Q4 and more broadly in 2025.”
Last quarter, Netflix revealed it secured “a 150% plus increase in upfront ad sales commitments over 2023.” The corporate has previously said its goal is to make ads “a more substantial revenue stream that contributes to sustained, healthy revenue growth in 2025 and beyond.”
Leading as much as the outcomes, Netflix’s stock had been on a tear with shares up around 45% because the start of the 12 months and trading near all-time highs.
Analysts expect one other price hike by the tip of the 12 months, which can likely function one more catalyst for shares. However the stock’s recent run-up has led to some apprehension on Wall Street.
Price hike to come back?
The corporate recently revealed subscribers watched over 94 billion hours on the platform from January to June as a part of its latest biannual viewership report, although year-over-year engagement levels got here in roughly flat — a possible headwind with regards to pricing power, which has turn out to be especially essential for streaming corporations as consumers turn out to be more picky.
On average, US consumers subscribe to 4 streaming services and spend about $61 monthly, in keeping with the newest Digital Media Trends report from Deloitte. Retaining loyal subscribers over time is a challenge as a result of consumers churning out of, or canceling, their subscription plans.
Netflix last raised the worth of its Standard plan in January 2022, upping the monthly cost to $15.49 from $13.99. It also raised the worth of its Premium tier by $2 to $19.99 a month at the identical time; the corporate again raised the price of that plan last October to $22.99.
The corporate has yet to boost the worth of its ad-supported offering, introduced lower than two years ago, which stays one among the most cost effective ad plans amongst all of the key streaming players at $6.99 a month.
“Given Netflix’s low price per viewed hour, we see scope for the firm to boost US prices by 12% in 2025,” Citi analyst Jason Bazinet said ahead of the report.
The corporate recently phased out its lowest-priced ad-free streaming plan, making the $15.49 Standard plan its most cost-effective offering for an ad-free experience.
Alexandra Canal 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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