Netflix reported third-quarter 2024 earnings of $5.40 per share, surpassing the Zacks Consensus Estimate by 6.09%. The figure marked a substantial 44.8% increase from the previous year.
Revenue for the quarter stood at $9.82 billion, up by 15% compared to the previous year, surpassing the consensus estimate by 0.6%.
The company showcased a sustained level of engagement in the third quarter, with an average of two hours of viewing per member per day, a strong indicator of member retention.
In the ad space, ad tier memberships saw a 35% increase quarter over quarter. Netflix is currently developing an in-house ad tech platform, scheduled for testing in Canada during the fourth quarter before a wider 2025 launch.
Subscriber Growth Fuels Q3 Revenue Surge
Average paid memberships grew by 15% year over year. During the third quarter, Netflix added 5.07 million subscribers, with its ad-supported service being responsible for over half of the sign-ups in eligible countries. This growth contrasts with the addition of 8.76 million subscribers in the same period last year, reflecting a diminishing impact from measures taken against password sharing that commenced in 2023.
Revenue per membership remained flat year over year but increased by 5% on a foreign-exchange neutral basis in the third quarter.
As of the end of the third quarter, Netflix boasted 282.72 million paid subscribers across over 190 countries globally, marking a 14.4% increase year over year.
This Zacks Rank #3 (Hold) entity attributed its third-quarter success to its intellectual property strength, driven by a diverse range of popular series and documentaries like “The Perfect Couple,” “Monsters: The Lyle and Erik Menendez Story,” “The Menendez Brothers,” “Nobody Wants This,” “Simone Biles: Rising,” “The Accident,” “Desperate Lies,” “Breathless,” “Tokyo Swindlers,” and “Culinary Class Wars,” among others.
Expanding Horizons and New Ventures
Looking ahead, Netflix is exploring new ventures such as live events, including the upcoming Mike Tyson and Jake Paul boxing match and two Christmas Day NFL games featuring prominent teams.
In the fourth quarter, members can anticipate returning hits like “Squid Game” S2, “Outer Banks” S4, and “Love is Blind” S7, as well as new series like “Black Doves,” “No Good Deed,” and “Man on The Inside.”
Netflix’s unscripted offerings include “Aaron Rodgers: Enigma” and the second season of the music competition series “Rhythm + Flow.” The company’s film slate features productions like the action-thriller “Carry-On,” war drama “The Six Triple Eight,” and “Spellbound.”
Revenue Breakdown by Region
In the United States and Canada (UCAN) segment, revenues reached $4.32 billion, up by 15.7% from the previous year, representing 44% of total revenues. Average revenue per user (ARPU) grew by 4.7% year over year.
The paid subscriber base for UCAN expanded by 9.7% from the previous year to 84.4 million.
For Europe, the Middle East & Africa (EMEA), revenues hit $3.13 billion, marking a 16.3% increase year over year and constituting 31.9% of total revenues. ARPU in this region grew by 0.1% from the previous year.
The paid subscriber base in EMEA increased by 14.8% year over year to 96.13 million.
Latin America (LATAM) generated revenues of $1.24 billion, showing an 8.6% year-over-year increase and contributing 12.6% of total revenues, although ARPU declined by 5.1%.
Paid subscribers in LATAM rose by 12.7% from the previous year to 49.18 million.
Unveiling Netflix Inc: Q3 Earnings and Beyond
Netflix, the trailblazer in the streaming industry, unveiled its Q3 earnings report, showcasing a surge in subscribers, revenue, and prospects.
Asia Pacific’s Revenue Surge
Asia Pacific’s revenues catapulted by 18.9% year over year, contributing 11.5% to the total revenues. Despite a 4.1% decline in ARPU, the paid subscriber base in APAC escalated by 24% from the previous year, reaching a remarkable 52.6 million.
Operating Details highlighted a 15.1% increase in marketing expenses, leading to a $2.9 billion operating income, which was a 51.8% year-over-year surge. The operating margin also expanded by 720 basis points to 29.6%.
Financial Strength and Projections
Netflix closed the quarter with $7.45 billion in cash, reflecting an increase from the previous quarter. Total debt rose to $15.98 billion, partly due to a successful $1.8 billion bond issuance. Notably, streaming content obligations stood at $22.7 billion.
The company reported a free cash flow of $2.19 billion, featuring a substantial uptick. Additionally, Netflix repurchased shares worth $1.7 billion during the quarter and retains $3.1 billion for future buybacks.
Robust Guidance and Forecasts
In its forecast for Q4 2024, Netflix anticipates a 15% revenue increase, outperforming market expectations. Earnings are projected at $4.23 per share, hinting at robust growth. The company also envisions a healthy rise in paid net additions, along with a promising fourth-quarter operating margin of 22%.
Looking ahead to 2025, Netflix envisions revenue growth of 11-13% from 2024, driven by an increase in paid memberships and ARM. Notably, the company aims for a 28% operating margin in 2025, showing a positive trend year over year.
Furthermore, Netflix’s advertising business is set for significant growth, with a projected doubling of ad revenues in 2025.
