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Netflix posted a 15 per cent rise in revenues in the third quarter to $9.8bn, slightly ahead of expectations, while subscriber numbers rose despite the numbers of global smash hits being squeezed by last year’s Hollywood strikes.
The US streaming service added 5.1mn subscribers in the three months, beating estimates and belying fears that it had not produced many “must-see” new programmes to lure fresh customers. The shares rose 5 per cent in after-hours trading.
Though tightening the use of passwords has boosted subscriber growth, analysts are raising the question of when that effect will tail off. Subscriber growth in the quarter outpaced expectations but it was significantly lower than in the same quarter last year.
Hits in the quarter included new series like The Perfect Couple, Nobody Wants This and Tokyo Swindlers, it said.
Ted Sarandos, co-chief executive, said on a call with analysts that he was “feeling really good” about the business next year.
Netflix is investing heavily in live sporting events such as WWE’s Monday Night Raw and NFL American football holiday games, with such live-streamed content seen as providing an “appointment to view” for subscribers and differentiating it from rival streamers in the pursuit of new viewers.
In a letter to shareholders, Netflix said: “We’ve delivered on our plan to reaccelerate our business, and we’re excited to finish the year strong with a great Q4 slate, including Squid Game [series two], the Jake Paul/Mike Tyson fight and two NFL games on Christmas Day.”
Forrester Research director Mike Proulx said: “With every quarter, Netflix looks more and more like linear TV. The company is on a live programming rampage right now that has everything to do with courting ad dollars in order to diversify its sources of revenue.”
For the full year of 2024, Netflix said it expected revenue growth of 15 per cent — the high end of its forecast range — and an operating margin of 27 per cent. Operating margin was 30 per cent in the third quarter, higher than the 22 per cent hit a year before.
Netflix will stop reporting subscriber numbers next year as it seeks to shift investor focus to revenues and profits.
A crackdown on password-sharing has boosted income, and the company has introduced lower-priced tiers of subscription where programming comes with advertising. Netflix said that membership with ads was up more than a third quarter on quarter but it had “much more work to do improving our offering for advertisers, which will be a priority over the next few years”.
“We’re pleased that we’ve reaccelerated our growth and, as we head into 2025, we expect to deliver solid revenue and profit growth by both improving our core series and film offering while investing in new growth initiatives like ads and gaming,” the Netflix letter said.
For 2025, the company is forecasting revenue of $43bn-$44bn, which would represent growth of 11-13 per cent from expected 2024 revenues. Operating margin is anticipated to be 28 per cent, against the 27 per cent expected for 2024, but that “after delivering outsized margin improvement in 2024, we want to balance near-term margin growth with investing appropriately in our business”.
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