Netflix has exceeded its target of 5 million subscribers as its ad-supported tier continues to gain traction.

The company's performance exceeded the forecast of 4 million new subscribers, resulting in a 4.8% increase in its shares.
Netflix has exceeded its target of 5 million subscribers as its ad-supported tier continues to gain traction.

More subscribers than Wall Street's projections gained Netflix in the third quarter of 2024, Netflix said, mainly due to the growing ad-supported service, accounting for more than 50% of sign-ups in markets where it is available.

The company's share rose 4.8% after hours Thursday after it reported adding more than the projected number of 4 million new subscribers.

Well, it was not about having too many subscribers; Netflix reportedly gained 5.1 million subscribers in the third quarter of 2024, easily surpassing the estimate of adding 4 million new subscribers. The shares reportedly posted a 4.8% gain after-hours on Thursday.

But it is not that huge; the addition did not reach the 8.76 million subscribers added in the same quarter last year.

Netflix increased its revenue to $9.825 billion, two cents more than what analysts had projected at $9.769 billion. Net operating margins also improved to 30% from 22% a year ago.

Earnings per share reached $5.40 per share, beating Wall Street estimates of $5.12 earnings per share. While this is very good for the bottom line, analysts went on to raise some red flags. As a matter of fact, the firm's subscriber growth was less impressive in some of the markets, particularly in the company's home market in the US, where the market seems to be nearing saturation.

Moving away from the focus on subscribers, the company will focus on profitability and revenue growth.

Starting in 2025, the company will no longer publish subscriber counts; rather, it will concentrate on such financial measures as revenue and profit margins.

To find growth, Netflix has focused on its ad-supported tier of service. It expects ads to represent a significant share of its revenue by 2026.

Content-wise, Netflix is also looking forward to strong holiday season growth, with hopes that subscribers continue rising with the return of its popular Korean drama series Squid Game in December.

The streaming giant also plans a diversified content play with live events, such as a boxing bout between YouTube personality Jake Paul and Mike Tyson in November as well as two National Football League games on Christmas Day.

Netflix also is jacking up its prices in Spain and Italy, like the rest of Europe markets experienced earlier this month.

Co-chief executive Ted Sarandos reiterated that Netflix was committed to enhancing its value proposition, and joining cheap bundles with other streamers, such as Disney and Warner Bros Discovery, will never be on the cards.

The company has incurred much in staff cuts as it continues restructuring this year. The company actually let go of 15 employees who were working in its film department in April.

Another round of layoff has just recently been executed where around 10 employees were cut in the publicity divisions handling some of its series and films.

Led by VP of Domestic Publicity Natalie Bjelajac, this restructuring is part of a larger pattern of retrenchment within the media sector as the economic weight on companies deepens.

As the company still continues to make its strategic decisions, including increasing prices and reducing the workforce, Netflix sees hope in recalibrating growth to regain its position atop the global streaming market.

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2024-10-23 07:17:57