In a recent earnings report, Netflix announced its third-quarter results, surpassing both revenue and earnings expectations, primarily driven by a significant increase in its advertising tier memberships.
Surge in Ad-Tier Membership
The company revealed that ad-tier memberships saw a remarkable 35% increase quarter over quarter. This subscriber growth aligns with Netflix’s strategy to expand its advertising service, which is set to launch in Canada in the upcoming quarter, with a broader rollout planned for 2025. Although Netflix does not anticipate advertising will be a major growth driver until 2026, it reported that the ad tier constituted over 50% of new sign-ups in regions where the service is already available.
Following the announcement, Netflix’s shares experienced a boost, rising approximately 5% in after-hours trading.
Earnings Overview
For the quarter ending September 30, the streaming giant posted earnings per share of $5.40, exceeding the $5.12 anticipated by analysts from LSEG. Revenue for the period reached $9.83 billion, surpassing expectations of $9.77 billion. The total paid memberships climbed to 282.7 million, slightly higher than the anticipated 282.15 million according to StreetAccount estimates.
The company’s net income for the quarter was reported at $2.36 billion, or $5.40 per share, a significant rise from $1.68 billion, or $3.73 per share, during the same period last year. This represents a 15% revenue increase from $8.54 billion in the previous year.
Future Projections
Looking ahead, Netflix forecasts fourth-quarter revenue to hit $10.13 billion, with earnings per share projected at $4.23. For the entire year of 2025, the company anticipates revenue between $43 billion and $44 billion as it enhances its core series and film offerings while investing in new ventures such as advertising and gaming. Much of this anticipated growth is expected to stem from a healthy rise in paid memberships.
Subscriber Growth
During the third quarter, Netflix successfully added 5.1 million subscribers, outpacing Wall Street’s estimate of 4.5 million. The service now boasts a total of 282.7 million memberships across various pricing tiers. Starting in 2025, Netflix plans to shift its focus away from updating investors on subscriber numbers, instead emphasizing revenue and other financial metrics as key indicators of performance.
Content Highlights
Netflix has highlighted several new shows and returning favorites that contributed to its subscriber growth. Notable releases include The Perfect Couple, Nobody Wants This, and Tokyo Swindlers, alongside new seasons of popular series like Emily in Paris and Cobra Kai. The company also noted the successful launch of films such as Beverly Hills Cops: Axel F, Rebel Ridge, and Officer Black Belt, which attracted considerable viewership.
Looking toward the end of the year, Netflix is set to premiere the second season of the highly anticipated series Squid Game. Additionally, the company plans to air live sports events, including a boxing match between Jake Paul and Mike Tyson, as well as two National Football League games on Christmas Day.
As Netflix continues to adapt and innovate in the competitive streaming landscape, its recent earnings report underscores its efforts to leverage advertising as a new revenue stream while maintaining a focus on original content that resonates with audiences worldwide.
