Netflix reported a 2.41m increase in global membership in the third quarter, marking the first subs gain this year as it beat forecasts across several metrics in the run-up to next month’s launch of its ad-supported tier.
The gains saw worldwide membership levels rise from 220.67m in the second quarter to 223.09m, reflecting 4.5% year-on-year growth and ahead of the company’s 1m growth forecast.
Stock surged 14% in after hours trading before settling on 12% higher than wat the start of the day.
By region, the biggest rise in paid net additions was 1.43m in Asia-Pacific (34.8m to 36.23m), followed by EMEA on 570,000 (72.97m to 73.53m), 310,000 in Latin America (39.62m to 39.94m), and the most mature market of the US and Canada on 100,000 (73.28m to 73.39m).
The company forecast an additional 4.5m members in the fourth quarter. The picture is in stark contrast to earlier this year, when Netflix lost 200,000 net members in Q1, its first subscriber loss in a decade which sent the stock price into free-fall and forced the company to lay off hundreds of staff and rein in content spend. Q2 losses amounted to 970,000, and while that was a far bigger hit, Netflix averted a perception crisis by previously forecasting a 2m loss.
Revenue and earnings per share also bucked earlier forecasts. Revenue for Q3 came in at $7.926bn for 5.9% year-on-year growth, while earnings per share reached $3.10. Forecasts put these lines at $7.85bn and $2.22, respectively. The fourth quarter forecast for both metrics is $7.776bn (impacted by the strong US dollar and exchange rates) and $0.36, respectively.
The company said because the US dollar has strengthened at a historic rate this year, it will negatively
impact full year 2022 revenue and operating income by roughly $1bn and $800m, respectively.
Returning to the 4.5m projected global membership gain in the fourth quarter, Netflix did not say how many of those would come from the new ad-supported Basic With Ads tier, which launches in the US at $6.99 on November 3 and will arrive at a similar price point in Canada, the UK, Spain and other territories where the new tier will start from November 1-10.
It was also unclear how many existing subscribers of the ad-free tiers Netflix expects will migrate to Basic With Ads. Announcing the ad-tier launch date last week, COO Greg Peters said the company was forecasting “neutral to positive” revenue per subscriber on the new tier.
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