Netflix Q3 Earnings Surpass Expectations Netflix announced its third-quarter earnings, exceeding Wall Street consensus estimates. The company reported
Netflix Q3 Earnings Surpass Expectations
Netflix announced its third-quarter earnings, exceeding Wall Street consensus estimates. The company reported a 5.1 million paid member net add and a 14% year-over-year increase, reaching 282.72 million paid subscribers.
Financial Performance
Revenue reached $9.83 billion, a 15.7% year-over-year increase, while earnings per share was $5.40. Operating income of $2.9 billion represented 52% growth, operating margin was 29.6%, and free cash flow amounted to $2.19 billion.
Advertising Tier and Growth
In its letter to shareholders, Netflix stated that advertising tier membership grew 35% quarter-on-quarter, and its ad tech platform is on track to launch in Canada in Q4 and more broadly in 2025. The company noted that advertising is not expected to be a primary revenue driver in 2025, but it accounted for more than 50% of sign-ups in available markets in Q3 and grew 35% quarter-on-quarter.
Price Hikes and Member Growth
Netflix will increase prices in Spain and Italy starting October 18 and introduced price hikes earlier this month in several territories in the Europe, Middle East, and Africa region, and Japan. The company phased out the Basic plan in the United States and France in Q3 and will do so in Brazil in Q4. Analysts have been anticipating more price hikes as subscriber growth slows down due to the ongoing password sharing crackdown.
Engagement and Viewership
Netflix reported an audience of more than 600 million worldwide and an average of around two hours a day viewership per paid member. By account owner household, which excludes the impact of paid sharing, view hours gained year-on-year in the first three quarters of 2024.
Future Plans
Starting in 2025, Netflix will stop reporting membership numbers on a quarterly basis, preferring to update when it reaches certain milestones. The company also expects to focus more on engagement and viewership metrics in the future.
Regional Performance
Asia Pacific generated 19% year-over-year revenue growth to lead all regions, with strong content slates in Japan, South Korea, Thailand, and India. Revenue in Latin America grew 9% year-over-year, and the company reported that while recent price hikes and a "softer content slate" were behind a 100,000 paid membership net decline, membership growth had "rebounded nicely early in Q4’24." The United States and Canada, the most mature market, saw a 16% year-over-year revenue increase driven by 10% and 5% growth in average paid memberships and ARM (average revenue per member), respectively.
Content Offering in Q4
Looking ahead to the content offering in the fourth quarter, highlights include the second season of Squid Game, the Jake Paul-Mike Tyson boxing bout, and two NFL American Football games on December 25.
FAQs
- When will Netflix launch its ad tech platform?
- Canada in Q4 and more broadly in 2025
- How does Netflix expect to generate revenue in 2025?
- Not expected to be a primary revenue driver, but ad-tier membership is on track to grow 35% quarter-on-quarter
- What is the current paid membership number?
- 282.72 million
- How does Netflix plan to measure success in the future?
- Focusing more on engagement and viewership metrics
- When will Netflix stop reporting membership numbers on a quarterly basis?
- Starting in 2025
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