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Investors are buzzing with excitement as Netflix (NFLX) exceeded expectations in both earnings and subscriber growth during the third quarter, leading to a surge of over 8% in the streaming giant’s stock on Friday. The company reported a significant increase in revenue, with earnings per share (EPS) and subscriber additions also outperforming estimates.
Netflix’s revenue for the third quarter soared to $9.83 billion, a 15% increase from the previous year and surpassing the $9.78 billion consensus estimate from Bloomberg. The company’s strategic revenue initiatives, such as price increases on specific subscription plans, restrictions on password sharing, and the introduction of an ad-supported tier, contributed to this growth.
Looking ahead to the fourth quarter, Netflix anticipated revenue to reach $10.13 billion, exceeding analysts’ expectations of $10.01 billion. Moreover, the company shared its long-term revenue forecast for 2025, expecting revenue to range between $43 billion and $44 billion, compared to the consensus estimate of $43.4 billion for the full year.
Netflix also aims to improve its operating margins further, with a projected increase to 27% for the full year, up from the previous 26%. The company delivered a remarkable EPS of $5.40 for the quarter, significantly higher than the consensus estimate of $5.16 and a substantial improvement from the $3.73 EPS reported in the same period last year. Netflix anticipates a fourth-quarter EPS of $4.23, exceeding analysts’ expectations of $3.90.
Subscriber growth remained robust, with an additional 5 million subscribers joining during the third quarter, driven by popular releases like “The Perfect Couple” and “Nobody Wants This.” This surge followed the 8.05 million net additions in the previous quarter, beating expectations of 4.5 million. In total, the organization acquired 8.8 million paying subscribers in the third quarter of 2023.
Looking ahead, Netflix is optimistic about continued growth in subscriber additions, citing a strong content lineup and seasonal trends. With anticipated releases like “Squid Game” Season 2, the Jake Paul vs. Mike Tyson fight, and two NFL games scheduled for Christmas Day, the company expects even higher paid net additions in the fourth quarter compared to the third quarter of 2024.
Investors have hailed Netflix’s expansion into live events and athletics, along with the success of the ad tier, which accounted for more than 50% of sign-ups in countries where it was available. The company remains focused on enhancing its advertising business, with plans to launch its ad tech platform in Canada in the fourth quarter and expand it further in 2025.
In a statement accompanying the earnings release, Netflix highlighted its commitment to driving growth through innovative strategies, stating, “We are committed to expanding our advertising business and enhancing our offerings for advertisers.” The company reported a 35% quarter-on-quarter increase in ads membership and expressed confidence in the upcoming launch of its ad tech platform, which is poised to drive further revenue growth.
Overall, with robust revenue growth, strong EPS performance, and a steady increase in subscribers, Netflix’s future looks promising as it continues to lead the streaming industry and carve out its path for sustained success in the years to come.
