Netflix added 5.1 million streaming subscribers in the third quarter of 2024, exceeding Wall Street’s expectations by over 1 million. The company anticipates further growth during the holiday season, particularly with the return of the popular Korean drama “Squid Game.”
Following the earnings report on Thursday, Netflix shares rose 3.5% to $711.98 in after-hours trading.
Subscriber Growth and Programming Success
Analysts had predicted that Netflix would gain around 4 million subscribers from July to September. The quarter saw the release of new programming, including the murder mystery “The Perfect Couple” and the romantic comedy “Nobody Wants This.”
Financial Performance
Diluted earnings per share reached $5.40, surpassing the consensus forecast of $5.12, while revenue came in at $9.825 billion, slightly ahead of the expected $9.769 billion.
Looking ahead, Netflix projected that customer additions for the final three months of the year—typically a strong period due to the Christmas holiday—would exceed those of the September quarter, although specific numbers were not disclosed.
Shift in Focus for Investors
The company has been shifting investor focus away from subscriber growth to other key metrics, such as revenue growth and profit margins. Notably, its operating margin improved to 30% in the latest quarter, up from 22% a year ago.
In a letter to shareholders, Netflix stated:
“We’ve delivered on our plan to reaccelerate our business, and we’re excited to finish the year strong with a great Q4 slate,” highlighting upcoming programming, including the second season of “Squid Game.”
Recovery from Previous Disruptions
After facing disruptions from last year’s Hollywood strikes, Netflix’s programming volume has increased significantly. The average time spent watching Netflix was reported at two hours per day per member, indicating strong viewer engagement.
Advertising Venture and Future Plans
Almost two years into its advertising venture, Netflix is focused on increasing revenue from its ad-supported plans but does not anticipate advertising to become a primary growth driver until 2026. During the September quarter, more than 50% of new signups in regions where the ad-supported service was available came from this offering.
Live Events Strategy
Part of Netflix’s strategy includes live events, such as streaming a boxing match between YouTube star Jake Paul and Mike Tyson in November, followed by its first NFL games in December. Mike Proulx, a research director at Forrester, noted:
“Advertisers want to be part of big cultural moments. Compelling live programming will always amass and unite people for a snapshot in time. For brands, that’s a captive audience who’s ripe for advertising messages.”
Conclusion
Netflix’s ability to surpass subscriber growth expectations and improve financial metrics reflects its strategic adaptations in an evolving streaming landscape. As it prepares for a busy holiday season with exciting new content and innovative features like ad-supported plans and live events, Netflix aims to solidify its position as a leader in the competitive streaming market.
With ongoing investments in original programming and an eye toward future growth avenues, including advertising, Netflix is poised for continued success as it navigates challenges and opportunities within the entertainment industry.
