Netflix's earnings and subscriber growth are top estimates as investors eye potential price increases

Shares of Netflix (NFLX) rose as much as 5% in after-hours trading on Thursday, as the streaming giant beat third-quarter EPS and revenue estimates and forecast current-quarter revenue above Wall Street's expectations .

Revenue beat Bloomberg consensus estimates of $9.78 billion and reached $9.83 billion in the third quarter, up 15% from the same period last year, as the streamer continued to push for revenue initiatives such as its crackdown on password sharing and the ad-supported tier continued in addition to last year's price increases on certain subscription plans.

Netflix forecast fourth-quarter revenue of $10.13 billion, above consensus estimates of $10.01 billion.

For full-year 2025, the company expects revenue between $43 billion and $44 billion, compared to a consensus estimate of $43.4 billion. This would represent growth of 11% to 13% over the company's expected 2024 revenue guidance of $38.9 billion.

Diluted earnings per share (EPS) also beat estimates this quarter: the company reported earnings per share of $5.40, above consensus expectations of $5.16 and well above EPS from $3.73 it reported in the same period last year. Netflix forecast fourth-quarter earnings per share of $4.23, beating consensus estimates of $3.90.

The number of subscribers also rose sharply: after groundbreaking programs such as “The Perfect Couple” and “Nobody Wants This”, over 5 million more were added.

The subscriber gain of 5.07 million beat expectations of 4.5 million and follows the 8.05 million net additions the streamer added in the second quarter. The company added 8.8 million paying users in the third quarter of 2023.

“We expect fourth quarter net paid adds to be higher than third quarter 2024 due to normal seasonality and strong content selection,” the company said, pointing to upcoming releases such as “Squid Game” Season 2, the battle between Jake Paul and Mike Tyson and two NFL games on Christmas Day.

Investors have praised the company's move into sports and live events. Meanwhile, ad tier continues to gain importance.

“We continue to grow our advertising business and improve our offering to advertisers,” the company said in the earnings release. “Ads membership is up 35% quarter-over-quarter and our ad tech platform is on track to launch in Q4 in Canada and more broadly in 2025.”

Last quarter, Netflix announced that it had secured “an increase in upfront advertising sales commitments of more than 150% throughout 2023.” The company previously stated that its goal is to make ads “a more substantial source of revenue, contributing to sustainable, healthy revenue growth in 2025 and beyond.”

The story continues

Ahead of the earnings release, Netflix shares have been on a tear, with the stock up about 45% year-to-date and trading near all-time highs.

Analysts expect the share price to rise further by the end of the year, which will likely serve as another catalyst for the stock. But the stock's recent rise has caused some concern on Wall Street.

Is there a price increase coming?

The company recently revealed as part of its latest semi-annual viewership report that subscribers watched over 94 billion hours on the platform from January to June, although engagement levels remained roughly flat compared to last year – a potential headwind when it comes to the Pricing power has become particularly important for streaming companies as consumers become increasingly picky.

According to Deloitte's latest Digital Media Trends report, U.S. consumers on average subscribe to four streaming services and spend about $61 per month. Retaining loyal subscribers over the long term is challenging as consumers churn or cancel their subscription plans.

Netflix last increased the price of its Standard plan in January 2022, increasing the monthly cost from $13.99 to $15.49. At the same time, the price of the Premium tier was increased by $2 to $19.99 per month; The company increased the cost of this plan again last October to $22.99.

The company has not yet increased the price of its ad-supported offering, launched less than two years ago, which remains one of the cheapest advertising plans among all major streaming providers at $6.99 per month.

“Given Netflix's low cost per hour viewed, we see room for the company to increase U.S. prices by 12% in 2025,” Citi analyst Jason Bazinet said ahead of the report.

The company recently dropped its cheapest ad-free streaming plan, making the $15.49 Standard plan the cheapest deal for an ad-free experience.

Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send her an email at [email protected].

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