Netflix Earnings: Revenue at $9.82B, EPS $5.40, Subscriber Growth +5.07M

Netflix Q3 2024 Earnings Highlights:

Earnings per share (EPS) were $5.40, beating the estimate of $5.12, and up 45% compared to last year.

Revenue came in at $9.82 billion, slightly above the $9.78 billion estimate, marking a 15% increase year-over-year.

Netflix added 5.07 million new paid subscribers globally, surpassing the expected 4.52 million.

Full-Year Guidance:

Netflix expects revenue between $43 billion and $44 billion, which beats the estimate of $43.4 billion, reflecting 11-13% year-over-year growth.

The operating margin is forecasted to be 27%, up from the previous 26%.

Free cash flow is projected to be between $6.0 billion and $6.5 billion, close to the estimate of $6.38 billion.

The operating margin is expected to be 28%, higher than the estimate of 27.9%.

Q4 2024 Forecast:

Netflix expects revenue of $10.13 billion, above the estimated $10.05 billion.

The company forecasts EPS of $4.23, higher than the expected $3.90.

The operating margin is projected to be 22%, an improvement of 5 percentage points compared to the same period last year.

Streaming Performance:

Global streaming paid memberships reached 282.72 million, surpassing the estimated 281.92 million, with a 14.4% increase year-over-year.

In the U.S. and Canada (UCAN), net paid additions were +0.69 million, just below the estimate of +0.70 million.

In the Asia-Pacific region (APAC), Netflix added 2.28 million paid subscribers, beating the expected 1.56 million.

Average revenue per membership in UCAN increased by 5% year-over-year, reaching $17.06.

Latin America (LATAM) saw a slight drop in paid memberships, losing 0.07 million due to recent price changes.

Other Metrics:

Netflix’s operating income rose to $2.91 billion, up 52% year-over-year.

The operating margin improved by 7 percentage points, reaching 30%.

Free cash flow increased by 16% year-over-year to $2.19 billion.

Net income reached $2.36 billion, compared to $1.68 billion the previous year.

Regional Highlights:

UCAN region revenue grew by 16% year-over-year to $4.32 billion.

EMEA (Europe, Middle East, and Africa) revenue rose by 16%, reaching $3.13 billion.

APAC revenue increased by 19%, totaling $1.13 billion.

LATAM revenue grew by 9%, reaching $1.24 billion.

Engagement and Content:

Average viewing per membership increased, with members watching 2 hours per day.

Popular content includes The Perfect Couple, Cobra Kai Season 6, Emily in Paris Season 4, and films like Beverly Hills Cop: Axel F.

Upcoming major releases in Q4 include Squid Game Season 2, NFL Christmas Games, and more high-profile shows and movies.

Monetization and Strategic Updates:

Ad-supported memberships grew by 35% quarter-over-quarter.

Netflix will launch its ad tech platform in Canada during Q4, with a global rollout planned for 2025.

The company implemented price increases in markets like Spain, Italy, and Japan.

U.S. ad sales commitments increased by 150% year-over-year in the latest Upfront advertising deals.

Capital Structure and Cash Flow:

Netflix generated $2.32 billion in net cash from operations.

Total debt rose to $16 billion, up from $14 billion in Q2, with net debt at $6.8 billion.

The company repurchased 2.6 million shares for $1.7 billion, with $3.1 billion remaining under the current buyback authorization.

CEO and CFO Commentary:

Co-CEO Greg Peters emphasized Netflix’s strong performance, with 15% revenue growth and improved margins, and expressed optimism about the company’s Q4 content slate.

CFO Spence Neumann highlighted Netflix’s projected 15% year-over-year revenue growth and free cash flow exceeding $6 billion, positioning the company for a successful 2025.

Engagement on Netflix is strong, with users watching an average of around two hours each day for each paid membership, even with the effects of paid sharing. As we mentioned before, paid sharing has led to less viewing on shared accounts since fewer people are using them.

Additionally, when sharers got their own subscriptions, much of their viewing was already counted in the total hours watched, which affected the average viewing hours per membership.

When we look only at households that own their subscriptions (excluding the effects of paid sharing), the viewing hours for those households increased year over year in the first three quarters of 2024.