Shares of Netflix (NFLX) rose as much as 5% in after-hours trading Thursday, as the streaming giant beat third-quarter earnings and revenue expectations and topped current quarter revenue expectations that topped Wall Street expectations .
Revenue surpassed Bloomberg consensus expectations of $9.78 billion to reach $9.83 billion in the third quarter, up 15% from the same period last year, as the streamer continued to lean on revenue initiatives like the crackdown against password sharing and ad-supported level. addition to last year’s price increases for certain subscriptions.
Netflix led fourth-quarter revenue of $10.13 billion, an improvement over consensus estimates of $10.01 billion.
For full-year 2025, the company expects revenue to be between $43 billion and $44 billion, compared to consensus estimates of $43.4 billion. This would represent 11% to 13% growth over the company’s 2024 revenue guidance of $38.9 billion.
Diluted earnings per share (EPS) also exceeded expectations in the quarter, with the company reporting earnings per share of $5.40, above consensus expectations of $5.16 and well ahead of the $3.73 EPS estimate it reported in the same period last year. Netflix guided to fourth-quarter earnings per share of $4.23, ahead of the $3.90 consensus call.
Subscriber numbers were also strong, adding more than five million subscribers after breakout shows like “The Perfect Couple” and “Nobody Wants This.”
The subscriber count of 5.07 million exceeded expectations of 4.5 million and follows the net 8.05 million the streamer added in the second quarter. The company had added 8.8 million paying users in the third quarter of 2023.
“We expect Q4 paid net additions to be higher than Q3 24 due to normal seasonality and strong content,” the company said, citing upcoming releases such as “Squid Game” Season 2, The Fight between Jake Paul and Mike Tyson. , and two NFL games on Christmas Day.
Investors have praised the company’s forays into sports and live events. Meanwhile, the advertising level continues to gain popularity.
“We continue to grow our advertising business and improve our offerings for advertisers,” the company said in its earnings release. “Ads membership is up 35% quarter-over-quarter and our ad tech platform is on track to launch in Canada in the fourth quarter and more broadly in 2025.”
Last quarter, Netflix revealed it achieved “a 150% increase in advance ad sales commitments versus 2023.” The company has previously said its goal is to make advertising “a more substantial revenue stream that will contribute to sustainable, healthy revenue growth in 2025 and beyond.”
Leading up to the results, Netflix shares were on a tear, with shares up about 45% since the start of the year and trading near record highs.
Analysts expect another price surge by the end of the year, which will likely serve as yet another catalyst for stocks. But the stock’s recent surge has caused some concern on Wall Street.
Price increase coming?
The company recently revealed that subscribers watched more than 94 billion hours on the platform from January to June as part of its latest semi-annual viewership report, although engagement levels remained roughly flat year-over-year – a potential headwind when it comes to pricing power, which is especially important for streaming companies as consumers become more picky.
According to Deloitte’s latest Digital Media Trends report, U.S. consumers subscribe to four streaming services on average and spend about $61 per month. Retaining loyal subscribers over time is a challenge as consumers cancel or cancel their subscription plans.
Netflix last increased the price of its standard subscription in January 2022, raising the monthly cost to $15.49 from $13.99. At the same time, it increased the price of its Premium tier by $2 to $19.99 per month; the company raised the cost of that plan again last October to $22.99.
The company has priced its ad-supported offering, which was introduced less than two years ago, still one of the cheapest ad plans among all the major streaming players at $6.99 per month.
“Given Netflix’s low cost per hour watched, we see opportunity for the company to increase U.S. prices by 12% through 2025,” Citi analyst Jason Bazinet said ahead of the report.
The company recently phased out its cheapest ad-free streaming plan, making the $15.49 Standard plan the cheapest 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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