Netflix Q3 Results Top Estimates, Stock Up In After-hours

(RTTNews) - Netflix Inc. (NFLX) reported that its net income for the third quarter rose to $2.36 billion or $5.40 per share from $1.68 billion or $3.73 per share in the prior year. Analysts polled by Thomson Reuters expected the company to report earnings of $5.12 per share for the third quarter. Analysts' estimates typically exclude special items.

Average paid memberships increased by 15% year over year, with paid net additions in third-quarter of 204 reaching 5.1 million, compared to 8.8 million in third-quarter 2023.

Ads membership was up 35% quarter on quarter. The company's in-house first-party ad tech platform is on track to roll out in Canada next month, with a broader launch planned for all ad countries in 2025.

NFLX closed Thursday's regular trading at $687.65 down $14.35 or 2.04%. But in the after-hours trading the stock gained $29.40 or 4.28%.

Revenues for the third quarter grew to $9.82 billion from $8.54 billion in the prior year. Analysts expected revenue of $9.77 billion for the quarter.

Looking ahead for the fourth quarter, the company expects 15% revenue growth, or 17% on a F/X neutral basis. It expects paid net additions to be higher in the fourth-quarter than in the third quarter of 2024 due to normal seasonality and a strong content slate. It projects fourth quarter operating margin of 22%, a five percentage point year-over-year improvement.

The company expects earnings per share to be $4.23 and revenue of $10.13 billion for the fourth-quarter. Analysts expect the company to report earnings of $3.91 per share and revenues of $10.04 billion for the fourth quarter.

For 2024, the company now expects revenue growth of 15% year over year, which is at the high end of its projected range of 14% to 15%. Additionally, it anticipates an operating margin of 27%, an increase from the previously forecasted 26%.

The company said it is pleased to have reaccelerated its growth, and as it heads into 2025, it expects to deliver solid revenue and profit growth by enhancing its core series and film offerings, while also investing in new growth initiatives such as ads and gaming.

For 2025, based on foreign exchange rates as of September 30, 2024, the company forecasts revenue of $43 billion to $44 billion, representing growth of 11% to 13% compared to its 2024 revenue guidance of $38.9 billion. Revenue growth is expected to be driven by a healthy increase in paid memberships and average revenue per member (ARM).

The company targets a 2025 operating margin of 28%, also based on foreign exchange rates as of September 30, compared to its forecast of 27% for 2024. After delivering significant margin improvement in 2024, the company aims to balance near-term margin growth with appropriate investments in its business. It still sees ample opportunity to increase margins over the long term.

The company is on track to achieve what it believes to be critical ad subscriber scale for advertisers in all of its ad countries by 2025, creating a strong foundation for further increasing ad membership in 2026 and beyond. It is also pleased with the engagement on its ads plan, with view hours per membership comparable to engagement levels on its standard plan in the 12 ad countries. However, there is still significant work to be done to improve the offering for advertisers, which will be a priority over the next few years.

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