Netflix shares jump 7% in premarket after third-quarter earnings beat
Netflix saw momentum in its ad-supported membership tier, which jumped 35% quarter-over-quarter.
Netflix shares jumped Friday after the media streaming giant reported third-quarter earnings and revenue that beat expectations.
Netflix Surpasses Earnings Expectations, Shares Soar as Ad-Supported Tier Shows Significant Momentum
In a major boost to its investors, Netflix reported a stellar set of earnings for the third quarter, surpassing expectations and sending its shares skyrocketing in premarket trading. The streaming giant's revenue and earnings per share (EPS) both exceeded analyst estimates, with EPS coming in at $5.40 and revenue reaching a record-breaking $9.83 billion.
The company's ad-supported membership tier, which was launched earlier this year, showed remarkable momentum, with a 35% quarter-over-quarter increase. This growth is particularly noteworthy, as Netflix does not expect ads to become its primary growth driver until 2026. However, the ad-tier accounted for over 50% of sign-ups in the third quarter in countries where it is available, indicating a strong demand for the service.
Netflix also provided an optimistic outlook for the December quarter, forecasting a 14.7% increase in revenue to $10.128 billion. The company expects revenue to reach $43 billion to $44 billion in 2025, representing growth of 11% to 13% from its expected 2024 revenue of $38.9 billion.
analysts at Citi praised Netflix's fourth-quarter outlook, stating that it "exceeded the Street," while its 2025 forecast was "relatively in line with consensus estimates." The analysts predicted that shares would trade higher on the back of the earnings report, citing the company's strong performance and growing ad-supported membership tier.
Richard Broughton, executive director of Ampere Analysis, told CNBC that Netflix's continued investments in content have been a key factor in its success, despite a challenging environment for the broader media landscape.
"It's a good indicator that some of the growth that dropped out of the market in 2022 is returning," he said. "If you think about the last 24 months, we've had cutbacks in content expenditure, hiring freezes, redundancies in some of the major studios and streamers. And aLL through this, Netflix has tried to keep investing in content. That sets it up extremely well over the next couple of years."
Broughton also highlighted Netflix's scale and dominance in the scripted TV market, noting that the company will be responsible for not far off one in 10 global series next year. "It's in a very, very different position compared to some of its competitors just in terms of scale," he said. "Netflix has a massive library of content, and it's able to produce a huge amount of original content every year. That gives it a significant advantage over its competitors."
Overall, Netflix's strong earnings report and upbeat outlook have sent a positive signal to investors, with shares expected to trade higher in the coming days. The company's continued focus on content investment and its growing ad-supported membership tier have set it up for success in the years to come. As the streaming landscape continues to evolve, Netflix's ability to adapt and innovate will be crucial in maintaining its position as a leader in the industry.
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