Streaming giant Netflix has proved there are still legs left in its membership growth, reporting 5 million new subscribers in its third quarter for a total of 282.7 million global members.
The Los Gatos, Calif., company also reported revenue of $9.8 billion for the fiscal third quarter that ended Sept. 30, an increase of 15% compared with the same period a year earlier. Net income rose 40% to about $2.4 billion.
The company reported earnings of $5.40 per share, surpassing analysts’ expectations of $5.12, according to Factset. Analysts had also projected revenue of $9.77 billion.
Netflix’s continued membership growth comes as analysts have questioned whether consumers are tiring of paying for additional streaming services or could potentially cut back on discretionary spending amid economic uncertainty.
Netflix’s performance in the third quarter was buoyed by original programming, including the fourth season of the Lily Collins-led drama “Emily in Paris” and the dramatized crime series “Monsters: The Lyle and Erik Menendez Story.” The company said it expects net paid additions — or new memberships — to increase in the fiscal fourth quarter, compared with the third quarter, due to “normal seasonality and a strong content slate.”
That slate includes Netflix’s continued expansion into the lucrative field of live sports with its upcoming boxing match between YouTuber Jake Paul and Mike Tyson set to stream in November, as well as two NFL Christmas Day games — events Wall Street analysts will closely watch as indicators of its advertising strength.
That same quarter, Netflix has the second season of the Korean thriller “Squid Game” and the seventh season of the reality dating show “Love Is Blind,” which premiered this month.
“In the aftermath of this volatile period of media disruption, Netflix has emerged in a leadership position that few foresaw almost ten years ago,” Morgan Stanley equity analysts Benjamin Swinburne and Thomas Yeh wrote in a note to clients ahead of Netflix’s earnings release.
The company’s revenue and share of TV time suggest “a long runway of potential growth,” they wrote.
Netflix said it expects total revenue for 2024 to increase 15% compared with the previous year, which would meet the high end of the company’s growth projections. For 2025, the company projects revenue of $43 billion to $44 billion, based on an expected increase in paid memberships and average revenue per member.
“Looking into 2025, we’re feeling really good about the business,” Netflix co-Chief Executive Ted Sarandos said during a company earnings interview on YouTube. “We had a plan to reaccelerate growth, and we delivered on that plan. We want to build on that success.”
Netflix has aimed to maximize its revenue by cracking down on password sharing among users and promoting an ad-supported tier, which costs $6.99 a month. Both efforts are being closely watched by analysts to see how they affect the company’s growth and how long they can boost profits. (Netflix has said it will stop providing quarterly membership numbers next year.)
“As more viewers convert to its ad tier, the challenge will be to keep time spent high in the face of advertising worsening the user experience,” Emarketer senior analyst Ross Benes said in a statement.
Though membership numbers are up, some analysts have cited Netflix’s recent engagement numbers as a sign of potential challenges ahead. For the first six months of this year, Netflix reported 94 billion hours viewed, an increase of just 1% from the same period last year. Faltering engagement due to paid sharing could put pressure on Netflix’s ability to raise prices, MoffettNathanson analyst Robert Fishman wrote in a recent research report.
Netflix has taken issue with that analysis, saying its engagement numbers have been strong, particularly when adjusted for the effects of the password sharing crackdown.
The company said in its third-quarter letter to shareholders that engagement totaled about two hours a day per paid membership on average. Viewership hours for “owner households” (that is, those not affected by paid sharing) rose for the first three quarters of this year, compared with the same period last year, Netflix said.
The company said its content offerings this year were “patchier than normal” due to last year’s dual Hollywood strikes but have started to pick up again.
Netflix’s stock rose 5% in after-hours trading. The shares closed Thursday at $687.65, down 2%. The stock price has risen more than 45% this year.