Netflix recovers from recent subscriber loss with 3rd quarter gains

Netflix has reversed recent subscriber loss with the summer profits that management is hoping to build with the launch of an upcoming, cheaper version of its video streaming service, which will be for the first time. including advertising.

The Los Gatos, California, company revealed Tuesday that it attracted 2.4 million subscribers in the July-September period, a comeback after losing 1.2 million customers in the second half of the year. at the beginning of the year in the context of stiffer competition and high inflation tightening household budgets.

Netflix now boasts 223 million subscribers, allowing the company to at least temporarily regain its position as the world’s largest video streaming service. The Walt Disney Company beat Netflix in August when it reported its service had 221 million subscribers, a number that will be updated on November 8 when Disney is expected to report results in the summer. .

“Thank God we’re done with the quarters shrinking,” Netflix co-CEO Reed Hastings exclaimed on Tuesday’s video conference call. “We’re getting back to being positive.”

The increase in subscribers also helped Netflix earn $1.4 billion, or $3.10 per share, down 4% from the same time last year. Revenue increased 6% year over year to $7.93 billion. Subscribers gain, earnings per share and turnover all top analyst forecasts compiled by FactSet.

Shares of Netflix jumped about 14% after the latest figures were released. So far, though, the stock has still lost more than half of its value this year, reflecting worries that Netflix’s best days are over.

Now that Netflix is ​​growing again, they’re aiming to accelerate momentum with the first ad-supported plan to launch in the US and 11 other markets in early November. The new option will cost $7. per month in the US, less than half the price of Netflix’s most popular $15.50 per month plan with no commercial interruptions.

“Netflix still has plenty of room to grow and capture market share in a price-sensitive market,” Investing.com analyst Haris Anwar said in a fresh sign of optimism about the company’s prospects.

In a possible sign, Netflix doesn’t expect the ad-supported plan to be an immediate hit, with management forecasting it will add 4.5 million subscribers between October and December. While that would be Netflix’s biggest quarterly gain this year, it would still be down from the 8.3 million subscribers it added during the same holiday period last year.

Netflix is ​​clearly hoping to ease Wall Street’s long-term focus on subscriber growth by stopping providing forecasts for how many customers it expects to add from one quarter to the next. Management revealed Tuesday that its current quarter subscriber forecast will be its final quarter, but it will continue to forecast earnings and revenue in the hope that investors will pay more attention to it. those numbers.

While investors are generally excited about Netflix’s expansion into the ad market, one big concern is whether the additional revenue generated from ad sales will be enough to offset the losses from those who are not. Existing subscriptions switch to a cheaper option from the higher price they are currently paying or not.

According to FactSet, Netflix expects nearly $7.8 billion in revenue for the quarter that includes the holiday season which, traditionally, drives more advertisers, slightly below analysts’ expectations. . If Netflix does live up to its revenue forecast, it translates to a 4% increase from the same time last year. By comparison, Netflix posted an annual revenue increase of 16% for the holiday quarter of 2021.

But an analysis by research firm Insider Intelligence predicts ads make up a significant portion of Netflix’s revenue. Next year, Netflix will rake in more than $830 million from advertisers in the US alone, followed by more than $1 billion in the US by 2024, according to Insider Intelligence.

“The economy is going to be fine,” Greg Peters, Netflix’s chief executive, said during Tuesday’s conference call.

Netflix is ​​hoping to garner even more subscribers early next year as it begins to stem the rampant password-sharing that has allowed millions of people to watch its service for free. As a prelude to forcing a segment of the market the company has labeled a “borrower,” Netflix on Monday revealed a new feature called “Transfer Profiles” that will allow viewers to export their customized recommendations and personal history to a new account.

“All the stars are lined up for us,” Hastings said on Tuesday.

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