Netflix added 5.1 million subscribers in Q3, beating Wall Street estimates by more than 1 million – but it was still the streamer’s smallest subs gain in over a year. The company now has 282.7 million global subscribers.
The streaming service saw earnings of $5.40 a share on revenue of $9.83 billion (€9.07bn), and profit rose from $1.6 billion in the same period last year to $2.3 billion.
Netflix reported that its ad-supported service accounted for more than 50 per cent of signups during the quarter in countries where it was available.
“We’ve delivered a string of hits this quarter, including new series like The Perfect Couple, Nobody Wants This and Tokyo Swindlers, returning favourites like Emily in Paris and Cobra Kai and big films like Beverly Hills Cop: Axel F, Rebel Ridge and Officer Black Belt,” the company said in a letter to shareholders.
“Our 2024 programming has been patchier than normal due to last year’s strikes. But our volume has picked up again and we’re excited for what’s ahead,” the letter added.
Shares were up over 5 per cent in after hours trading on October 17th.
Netflix is starting to raise subscription prices as growth spurred by its password-sharing crackdown begins to wane. The company has already lifted subscription fees in Japan and parts of Europe as well as the Middle East and Africa in recent weeks. Price increases in Italy and Spain are now also being rolled-out.
Responding to the results, Paolo Pescatore from PP Foresights said: “A bravura performance from Netflix that continues to be the standout performer amongst the global streaming companies and is obviously firing on all cylinders […] Make no mistake, this is a strong set of results which validates its strategy. Especially so as seasonality always tends to depress its net additions in this quarter. This may have been further affected too by the strong online performance of the Paris 2024 Olympics. Plus, we should remember, the ‘easy wins’ of its password crackdown initiative are now coming to an end.”
“Netflix will stop regularly reporting subscriber numbers at the end of the year. The next we are likely to hear from the company from 2025 onwards is when or if it breaks the magic 300 million subs barrier. Engagement is strong — two hours a day per paid membership on average — and the direction of travel is clear. Others continue to play catch-up.”
Looking ahead, Pescatore said: “A high-profile 2025 slate already includes the return of enormous hits Wednesday and Stranger Things and sees the addition of WWE live content. This gives it a strong hand and room to raise prices to continue revenue growth.”
“It is only at the start of a long journey in ads, and the potential for medium- to long-term growth is clear given its huge base and addressable market. However, it still does not forecast ads to be a primary driver of revenue growth in 2025. This is something that it will need to work on swiftly over the coming period with improved ad tech as growth via subs starts to slow in mature markets,” he concluded.
Guy Meyers, Senior Director, Customer Success at Recurly, said: “Netflix’s earnings underscore the effectiveness of a customer-centric model. By cracking down on password sharing and delivering tailored experiences, Netflix has set a high standard for streamers in the digital media landscape. With hit shows like Squid Game and Bridgerton, the platform is well-positioned to lead the industry and even implement price increases without alienating its loyal audience. Recurly’s State of Subscription data reveals that subscribers are increasingly attracted to personalised offerings, emphasising the critical role of customer retention in a competitive market. Subscriptions are firmly established, and Netflix is poised to capitalise on this trend. This comes at a time when churn rates for subscriptions in Digital Media and Entertainment continue to decrease, sitting at 8.7 per cent in 2022 and dropping to 5.6 per cent in 2023.
“The key to Netflix’s success lies in its shift towards evaluating performance metrics – prioritising revenue over subscriber counts. This strategic focus allows for a more accurate assessment of growth and financial health, further strengthening Netflix’s position in the evolving streaming landscape,” added Meyers.
Ed Mullins, Director, Inventory & Partnerships (EMEA) for StackAdapt, commented: “The streaming landscape is evolving rapidly, marked by increased competition from ad-supported services like Tubi entering the UK market. This trend highlights a growing willingness among consumers to accept advertising as a trade-off for high-quality content. Disney+ also recently reported that 60 per cent of its global subscribers are now on its ad-supported tier, underscoring the huge potential of this model across the industry. CTV is transforming how brands engage with viewers, providing opportunities for precise targeting and more effective advertising strategies. For Netflix, expanding its ad-supported tier is a win-win: it opens up a new revenue stream from ads while helping retain subscribers. The key to this balance is ensuring that ads are relevant, well-placed, and don’t disrupt the viewing experience. For advertisers, Netflix is an attractive proposition due to its highly engaged, diverse audience. The platform’s varied content, from Emily in Paris to Squid Game, draws in different demographics, making it a valuable channel for reaching a broad spectrum of viewers in a single space.
“Facing new challengers like Tubi, Netflix must enhance its innovative approaches to remain at the forefront of the industry. The platform’s capacity to deliver tailored advertising experiences to extensive audiences will be vital in navigating the competitive pressures of the streaming market while delivering value to both content creators and advertisers alike,” added Mullins.
Patrick Gather, Creative Director and Co-Founder, Wonderhatch, said: “These results continue to show Netflix has not only successfully cracked down on password sharing but its content is clearly still satisfying audiences – and no doubt competitors like Prime Video and Disney+ are watching closely. It’s also interesting to see Netflix’s continued wider impact on cultural relevance supporting this. Its content draws heavily from trends, fuelling cultural obsessions and creating immersive environments that influence audience behaviour. To me it seems like that this cultural footprint then reversely inspires advertising by pushing brands to adopt cinematic storytelling, visual aesthetics and things audiences respond well to. Additionally, as advertisers, it feels like we mirror Netflix’s trendsetting ability by creating campaigns that resonate emotionally, using serialised content and interactive elements to engage audiences.”