Netflix Tops Subscriber Targets as Ad-Tier Signups Surge
Netflix added 5.1 million new streaming subscribers in the third quarter of 2024, surpassing Wall Street expectations by over 1 million. This growth came largely from its ad-supported tier, which contributed to more than half of the new signups in countries where it is available. As a result, Netflix shares jumped 4.8% in after-hours trading, continuing their 47% rise for the year.
Despite the success in subscriber growth, Netflix is focusing more on revenue growth and profit margins. The company plans to stop reporting subscriber data next year, reflecting its shift toward emphasizing other financial metrics. Revenue for the quarter reached $9.825 billion, slightly ahead of projections, and Netflix’s earnings per share hit $5.40, exceeding the forecast of $5.12. Operating margins also saw significant growth, reaching 30% compared to 22% a year ago.
While the 5.1 million subscriber gain outpaced expectations, it was still a drop from the 8.76 million added in the same quarter last year. This has raised some concerns, particularly about Netflix’s domestic market, which some analysts believe may be nearing saturation. Forrester analyst Mike Proulx noted that while international growth opportunities remain, the U.S. market seems “tapped out.”
Looking ahead, Netflix is optimistic about the holiday season, anticipating even higher subscriber growth in the final quarter, driven by the much-anticipated return of the hit Korean drama Squid Game in late December. Co-CEO Ted Sarandos expressed confidence, stating, “We had a plan to re-accelerate the business, and we delivered on that plan.”
In addition to programming, Netflix has been expanding its live-event offerings, which are a key draw for advertisers. Upcoming events include a fight between YouTube star Jake Paul and boxing legend Mike Tyson, along with two NFL games scheduled for Christmas Day. These live events are part of a broader strategy to diversify its content and attract advertisers, though the company doesn’t expect advertising to be a major revenue driver until 2026.
Despite its success with the ad-supported tier, Netflix is maintaining its standalone approach in the streaming market. Sarandos reaffirmed that the company has no intention of bundling its service with other platforms like Disney+ or Warner Bros Discovery, preferring to focus on building its own value proposition.
Meanwhile, Netflix continues to adjust pricing strategies in key international markets. After raising prices in several European countries and Japan earlier this month, it will further increase prices in Spain and Italy this week.
