Netflix's stock surged by 5.4% in premarket trading on Friday after the streaming giant released its third-quarter earnings, which exceeded market expectations.
As of 4:39 a.m. ET, Netflix shares rose significantly, reflecting investor optimism following the announcement. The company reported earnings per share of $5.40 for the quarter ending September 30, surpassing the LSEG consensus estimate of $5.12. Additionally, Netflix's revenue reached $9.83 billion, topping analysts' expectations of $9.77 billion.
A key highlight from the earnings report was the strong performance of Netflix's ad-supported membership tier, which experienced a remarkable 35% increase quarter-over-quarter. Although the company does not anticipate advertising to become a primary growth driver until 2026, it noted that this ad-supported tier accounted for over 50% of new sign-ups in regions where it is available.
Looking ahead, Netflix offered an optimistic outlook for the upcoming December quarter, projecting a revenue increase of 14.7% to approximately $10.1 billion. The company is also forecasting revenues between $43 billion and $44 billion for 2025, indicating growth of 11% to 13% compared to its anticipated 2024 revenue of $38.9 billion.
Citi analysts remarked that Netflix's fourth-quarter outlook surpassed market expectations, while its 2025 projections aligned closely with consensus estimates. They expressed confidence that Netflix shares would continue to rise following the strong earnings report.
Richard Broughton, executive director at Ampere Analysis, highlighted Netflix's resilience in a challenging media landscape. In an interview on CNBC’s “Squawk Box Europe,” he noted that the company has maintained its commitment to investing in content, even amid broader industry cutbacks in spending and staffing.
Broughton emphasized that this strategy positions Netflix advantageously for future growth. He stated, “This is a positive sign that some of the growth that was lost in 2022 is beginning to return. Over the past two years, we’ve seen reductions in content budgets, hiring freezes, and layoffs among major studios and streaming platforms. Throughout this period, Netflix has continued to invest in content, which sets it up very well for the coming years.”
He added that Netflix is poised to produce a significant share of scripted television content globally, predicting that the platform will be responsible for nearly one in ten new series next year. This positions Netflix in a uniquely advantageous spot compared to its competitors, particularly in terms of scale and content diversity.
In summary, Netflix's strong Q3 performance, buoyed by its innovative ad-supported tier and strategic content investments, has led to a positive outlook among investors and analysts alike, suggesting continued growth for the streaming powerhouse in the upcoming quarters.
