Netflix (NFLX) stock rose more than 6% in pre-market trading on Friday after the streaming giant beat third-quarter EPS and revenue estimates and reported current-quarter revenue that beat Wall Street expectations did.
Third-quarter revenue reached $9.83 billion, beating the Bloomberg consensus estimate of $9.78 billion, Netflix reported after the market closed on Thursday, up 15% from a year ago. . This growth comes as streamers continue to rely on revenue measures like crackdowns on password sharing and ad-supported tiers, in addition to price hikes for certain subscription plans over the past year.
Netflix’s fourth-quarter revenue came in at $10.13 billion, beating the consensus estimate of $10.01 billion.
The company expects full-year 2025 sales to reach $43 billion to $44 billion, compared to the consensus estimate of $43.4 billion. This would represent an 11% to 13% growth from the company’s projected 2024 revenue of $38.9 billion.
The company expects full-year operating margin to reach 27%, up from 26% in the previous quarter, which reached nearly 30% in the third quarter.
Diluted earnings per share (EPS) also exceeded expectations for the quarter, with the company reporting EPS of $5.40, beating the consensus estimate of $5.16 and significantly higher than the $3.73 EPS reported in the year-ago period. exceeded. Netflix reported fourth-quarter EPS of $4.23, beating the consensus estimate of $3.90.
Subscriber numbers were also strong, with over 5 million more subscribers following blockbuster shows such as “The Perfect Couple” and “Nobody Wants This.”
Subscriber addition was 5.07 million, exceeding expectations of 4.5 million and following the streamer’s net addition of 8.05 million in the second quarter. The company added 8.8 million paid users in Q3 2023.
The company cited upcoming releases such as ‘Squid Game’ Season 2 and the Jake Paul vs. Mike Tyson fight, and said, “Thanks to normal seasonality and strong content, paid net additions are higher than in Q3 2024. We expect it to increase in the fourth quarter.” , there are two NFL games on Christmas Day.
Investors have praised the company’s foray into sports and live events. Meanwhile, the company’s advertising demographic continues to gain traction, accounting for more than 50% of sign-ups in ad-served countries in the third quarter.
“We continue to build our advertising business and improve our offerings to advertisers,” the company said in its earnings release. “Advertising membership is up 35% quarter over quarter, and our ad tech platform is scheduled to launch in Canada in the fourth quarter and more broadly in 2025.”
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Netflix revealed last quarter that it secured “more than 150% growth in prepaid ad sales contracts compared to 2023.” The company previously said its goal was to make advertising “a more substantial revenue source that contributes to sustainable and healthy revenue growth in 2025 and beyond.”
Netflix co-CEO Greg Peters said on an earnings call that advertising won’t be the primary driver of revenue next year, but that “we’re still growing our audience and inventory faster than we can monetize.” The company said it is looking into the matter. “An opportunity to fill that gap.”
Prior to the earnings release, Netflix’s stock price had been in free fall, with the stock up about 45% since the beginning of the year and trading near all-time highs.
Analysts expect further price increases by the end of the year, which is likely to drive the stock price higher. However, the recent rise in stock prices is causing concern on Wall Street.
Is the price going to increase?
The company recently revealed that its subscribers have watched more than 94 billion hours on the platform as part of its latest bi-annual viewership report, but year-over-year engagement levels have remained roughly flat, and pricing power has remained largely unchanged. This poses a potential headwind. This is especially important for streaming companies as consumers become more selective.
According to Deloitte’s latest Digital Media Trends Report, U.S. consumers subscribe to an average of four streaming services and spend about $61 per month. It’s difficult to retain loyal subscribers over the long term, as consumers cancel and unsubscribe from subscription plans in large numbers.
Netflix last increased the price of its Standard plan in January 2022, increasing the monthly fee from $13.99 to $15.49. At the same time, we increased the price of our premium tier by $2 to $19.99 per month. Last October, the company raised the cost of that plan again to $22.99.
The company has yet to raise the price of the ad-supported service it introduced less than two years ago, making it one of the cheapest ad plans among the major streaming players at $6.99 per month.
“Given Netflix’s low cost per viewing hour, we believe the company has room to increase U.S. prices by 12% in 2025,” Citi analyst Jason Bazinet said ahead of the report. ” he said.
The company recently phased out its lowest-priced ad-free streaming plan, making the $15.49 Standard plan the cheapest plan for an ad-free experience.
Netflix shares are trading at record highs as investors look to the stock as the next catalyst for a rally. (Courtesy: Getty Images) (Wachiwit via Getty Images)
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canalEmail LinkedIn, alexandra.canal@yahoofinance.com.
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