Netflix acquired 5.1 million new subscribers during the third quarter of 2024. The movie-streaming company surpassed Wall Street’s projected 4 million subscribers for the period. The number is also below the 8.76 million it acquired within the same period a year ago.
Shows that headlined the performance table on the movie streaming platform during the period include The Murder Mystery, The Perfect Couple and Nobody Wants This. According to the company, customer growth is expected to skyrocket when the Korean Drama “Squid Game” returns in December.
The company also reported that its ad-supported service delivered more than 50% of signups during the third quarter. Netflix has been trying to shift investor attention from sign-ups to metrics such as profit margins and revenue growth. The company plans to stop reporting subscriber data from next year, leaving to focus on ad-supported plans for more growth.
“On the surface, Netflix is trending in all the right directions,” said Forrester analyst Mike Proulx. “Financially, revenue and operating margins continue to increase and expenses are down“, he adds.
Netflix’s shares rose by 4.8% following hours of trading on Thursday. So far this year, the shares have gained about 47% in value.
During the quarter, Netflix earned $5.40 per share. This is above the analyst forecast of $5.12. It is also 22% higher than what it traded a year earlier (Q3, 2023). It also reported an operating margin of 30% and its revenue rose to $9.825 billion, a bit ahead of the $9.769 billion that was projected.
“We’re feeling really good about the business,” Co-CEO Ted Sarandos said in a video. “We had a plan to re-accelerate the business, and we delivered on that plan.”
The company also forecasts significant subscriber growth in the last quarter of the year. During that quarter, Netflix will release the second season of the popular Korean drama series, Squid Game in late December.
The streaming company is also betting on a strong line-up including the new Knives Out movie, the latest season of Stranger Things and live events including two National Football League games on Christmas Day to draw subscribers.
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Netflix Concerns Amidst Subscriber’s Growth
Despite outperforming forecasted growth for the 2024 third quarter, Netflix stood below the 8.8 million subscribers it picked up in the year-ago quarter. “A steep decline in net new subscribers is what’s concerning. While there’s room for net subscriber growth internationally, in the U.S. things are getting tapped out,” Proulx said.
Although Netflix reported subscriber gains in its ad-supported tier, it does not expect advertising to become a primary growth driver until 2026.
“They consistently remind us of crawl, walk, run and I think, yeah, it’s still definitely the beginning,” said Magalie Grossheim, senior equity research analyst at M. Science. “In our data, we continue to see that the selection rate for the ad-supported plan is accelerating in a lot of the mature markets.“
Part of its plan centers around live events including sports which can attract more advertisements. Netflix will stream a fight between YouTube star Jake Paul and Mike Tyson. This will be followed by two National Football League games on Christmas Day.
Netflix also plans to increase prices in Spain and Italy during late October. Earlier this month, it raised prices in a few European markets and Japan.
Netflix has thereby rejected the idea of adding Netflix to a discounted bundle with other streaming services such as Walt Disney and Warner Bros Discovery tabs. The company stressed that its growth plan is centred more on quality over quantity.
“What we’re focused on is adding more and more value to this package,” according to a statement from the company on Thursday.