Netflix beat most Wall Street consensus estimates in its third quarter earnings and reported a 5.1m paid member net add and 14% year-on-year increase to reach 282.72m.
Revenue of $9.83bn increased 15.7% year-on-year, while earnings per share was $5.40, operating income of $2.9bn represented 52% growth, operating margin was 29.6%, and free cash flow amounted to $2.19bn.
In its letter to shareholders, Netflix said advertising tier membership grew 35% quarter-on-quarter, and its ad tech platform was on track to launch in Canada in Q4 and more broadly in 2025.
Stock closed at $687.65 after a marginal gain on the start of the day and was up around 4% in after hours trading.
Approaching the second anniversary of the launch of its advertising business, the streamer said advertising was not expected to be a primary revenue driver in 2025. That said, the ad-tier accounted for more than 50% of sign-ups in available markets in Q3, while membership on the ads plan grew 35% quarter-on-quarter.
Netflix advised that it will increase prices in Spain and Italy starting on Friday (October 18), and introduced price hikes earlier this month in several territories in the Europe, Middle East and Africa region (EMEA), and Japan. It 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.
Looking at engagement, which co-CEO Ted Sarandos described in the analysts call as “our best proxy for member happiness” and is a key to subscriber retention, the company noted an audience of more than 600m worldwide and an average of around two hours a day viewership per paid member. By account owner household, which the company said excludes the impact of paid sharing, view hours gained year-on-year in the first three quarters of 2024.
Starting in 2025 Netflix will stop reporting membership numbers on a quarterly basis, preferring to update when it reaches certain milestones.
Netflix said Asia Pacific generated 19% year-on-year revenue growth to reach $1.12bn and lead all regions and there were strong content slates in Japan, South Korea, Thailand and India. Paid membership climbed by 2.28m to 52.6m.
Revenue in Latin America grew 9% year-on-year for $1.24bn. The company said while recent price hikes and a “softer content slate” were behind an approximately 70,000 paid membership net decline to 49.18m, subscriber growth had “rebounded nicely early in Q4’24”.
CFO Spencer Neumann said in the analysts call that if the quarter had lasted one more day, net adds would have been up. Sarandos added the Q4 Latin American slate included limited series Senna from Brazil about F1 legend Ayrton Senna, One Hundred Years Of Solitude from Colombia, and Rodrigo Prieto’s feature directorial debut Pedro Pàramo.
EMEA revenue came to $3.13bn, and paid membership climbed by 2.17m to 96.13m.
United States and Canada, the most mature market, saw a 16% year-on-year revenue increase to $4.3bn driven by 10% and 5% growth in average paid memberships and ARM (average revenue per member), respectively. Paid membership climbed by approximately 690,000 to 84.8m.
Looking ahead to the content offering in the fourth quarter, highlight are expected to include the second season of Squid Game, the Jake Paul-Mike Tyson boxing bout, and two NFL American Football games on December 25.
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