- Netflix added 5.1 million new streaming subscribers in Q3 2024, surpassing Wall Street estimates by over 1 million, primarily due to its ad-supported tier.
- The company anticipates further growth around the holiday season with the highly awaited return of Squid Game, which has contributed to a 47% increase in stock year-to-date.
Netflix added 5.1 million streaming subscribers in Q3, exceeding Wall Street estimates by over 1 million, primarily due to its ad-supported tier. The company expects continued growth around the holidays, particularly with the upcoming release of the second season of Squid Game.
What happened
Netflix’s recent earnings report for the third quarter of 2024 highlights a significant rebound, as the streaming giant added 5.1 million new subscribers, surpassing Wall Street’s projections by over 1 million. This impressive performance comes as the company anticipates even higher growth during the holiday season, particularly with the highly awaited return of the Korean drama “Squid Game.” Following the announcement, Netflix’s stock surged by 4.8% in after-hours trading, marking an impressive 47% increase year-to-date.
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In a strategic shift, Netflix aims to redirect investor focus from subscriber count to revenue growth and profit margins. The company plans to stop disclosing subscriber data next year, instead highlighting the success of its ad-supported plans, which accounted for over 50% of new signups in regions where the service is available. This aligns with the broader industry trend towards diversifying revenue streams, as streaming platforms adapt to a maturing market.
Netflix’s recent programming slate included hits like the murder mystery “The Perfect Couple” and the romantic comedy “Nobody Wants This,” which contributed to its subscriber growth. The company reported earnings of $5.40 per share, exceeding the expected $5.12, and saw its operating margin rise to 30%, compared to 22% during the same period last year. Revenue also experienced a slight uptick, reaching $9.825 billion, just above the consensus forecast of $9.769 billion. Co-CEO Ted Sarandos expressed optimism, stating the company had successfully re-accelerated its business. Despite this, Netflix acknowledged that its new subscriber numbers fell short of the previous year’s gains, highlighting a growing concern about market saturation, especially in the U.S.
Why this is important
Netflix’s significant subscriber growth, primarily through its ad-supported tier, indicates a potential shift in the streaming landscape as traditional subscription models evolve. Analysts, like Forrester’s Mike Proulx, note that while revenue and operating margins are improving, the overall slowdown in subscriber growth is concerning, particularly in mature markets. This situation reflects broader trends within the industry, where streaming platforms are increasingly vying for audience attention amid fierce competition.
As Netflix prepares for the holiday season with strategic releases, including the much-anticipated Squid Game, its approach to integrating advertising could redefine revenue models for the streaming sector. Netflix’s investment in live events, such as streaming sports and entertainment, demonstrates its commitment to enhancing viewer engagement, which is critical for attracting advertisers. This evolution in strategy not only impacts Netflix but sets a precedent for other streaming services, ultimately shaping the future of content consumption and advertising in the digital age.
As Netflix navigates a competitive landscape, its focus on innovative programming, international expansion, and ad-supported growth positions the company not only to compete with other streaming platforms but also to carve out a unique niche that could attract a broader audience. This strategy is set to establish Netflix as a critical player in the evolving entertainment industry.
