Netflix adds 5 million subscribers, topping targets as ad-tier signups grow

LOS ANGELES — Netflix picked up 5.1 million streaming subscribers in the third quarter, topping Wall Street estimates by more than one million, and said it expected higher customer growth around the holidays when South Korean drama Squid Game returns.

Shares of Netflix jumped 4.8 per cent in after-hours trading on Oct 17 following the earnings report. The shares have gained about 47 per cent so far in 2024.

As the pace of subscriber addition slows, Netflix has been trying to shift investor attention away from sign-ups to metrics including revenue growth and profit margins. It will stop reporting subscriber data from 2025, and is touting growth in its ad-supported plans.

The streaming giant said on Oct 17 that its ad-supported service accounted for more than 50 per cent of sign-ups in the third quarter in countries where it was available.

Wall Street had expected Netflix to bring in four million subscribers from July through September, according to analysts' estimates compiled by LSEG. New programming during the period included murder mystery The Perfect Couple and romantic comedy Nobody Wants This.

Netflix earned US$5.40 (S$7) per share in the quarter, above the consensus forecast of US$5.12. Operating margin hit 30 per cent in the quarter, compared with 22 per cent a year earlier.

Revenue rose to US$9.825 billion, just ahead of the US$9.769 billion consensus forecast.

"On the surface, Netflix is trending in all the right directions," said Forrester analyst Mike Proulx. "Financially, revenue and operating margins continue to increase and expenses are down."

But while the 5.1 million customer additions outpaced forecasts, they were below the 8.76 million that Netflix picked up in the year-ago quarter.

"A steep decline in net new subscribers is what's concerning. While there's room for net subscriber growth internationally, in the US, things are getting tapped out," Proulx said.

Netflix projected that its customer additions for the last three months of the year — traditionally a strong period around the holidays — would outpace the September quarter, though it did not provide a number. The second season of South Korean drama Squid Game is scheduled for release in late December.

Co-chief executive Ted Sarandos said in a post-earnings video: "We're feeling really good about the business. We had a plan to re-accelerate the business, and we delivered on that plan."

Part of the plan centres on live events including sports, a big draw for advertisers. In November, Netflix will stream a fight between YouTube star Jake Paul and Mike Tyson, followed by two National Football League games on Christmas Day.

The company also plans to increase prices in Spain and Italy on Oct 18. Earlier in October, it raised prices in a few European markets and Japan.

Sarandos has rejected the idea of adding Netflix to a discounted bundle with other streaming services such as Walt Disney and Warner Bros Discovery.

"What we're focused on is adding more and more value to this package," he said, calling this a "comfortable model" for traditional media companies.

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