Netflix bounced back in a big way in its fiscal third quarter, adding 2.41 million subscribers for the period that ended September 30 after two straight quarters of heavy losses. It also beat the streamer’s own expectations from last quarter that it would add 1 million subscribers, which now sits at 223.09 million globally.
But Netflix also projected the fourth quarter will see another notch higher in subscriptions after moving up the launch of its ad-supported pricing tier to November, having unveiled the details of the cheaper plan that starts at as low as $6.99/month earlier in October. The world’s biggest streaming platform expects to reach 227.57 million for final three months of the year.
“After a challenging first half, we believe we’re on a path to reaccelerate growth. The key is pleasing
members. It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us,” the streamer said in its letter to shareholders.
Netflix also sailed past Wall Street’s earnings expectations, posting revenue of $7.92 billion compared to an analyst average of $7.84 billion and a reported diluted earnings per share (EPS) of $3.10 compared to analyst predictions for $2.13. Netflix’s operating income for the quarter was $1.53 billion.
Last quarter, Netflix shed 970,000 subscribers, though it was still above some of the dismal figures that it predicted at the start of the year that sent investors running for the exits. Ahead of Tuesday’s market close, the company’s stock price climbed as much as 16% since first revealing the details of its ad-supported plan.
The streamer cautioned in its quarterly letter to shareholders that, despite its optimism regarding the advertising business, they don’t expect it to have a “material contribution in Q4’22.”
“Our aim is to give our prospective new members more choice – not switch members off their current plans. Members who don’t want to change will remain on their current plan, without ads, at the current price,” the letter reads.
The initial reaction from Wall Street analysts: “Streaming is alive,” said Lightshed Partners analyst Rich Greenfield in a tweet. He then posted a GIF of a cartoon hand popping out of a Halloween-like grave. Netflix shares skyrocketed in post-market trading after results were release. The stock rose $30,52, or 12.7%, to $271.38.
Netflix’s third quarter was in part buoyed by the finale of “Stranger Things 4,” which delayed the final two episodes of its season at the front end of the period after dropping the bulk of the season earlier in the summer. The single season is Netflix’s most-viewed show of all time by a healthy margin, posting 1.35 billion hours viewed on the streamer in its first 28 days, according to its own internal metrics. Netflix had another hit on its hands in recent weeks with Ryan Murphy’s “Dahmer,” which in its short time has already rocketed to the No. 2 most-viewed series of all time. And on the film side, the streamer had a modest hit with this summer’s “The Gray Man,” now the streamer’s fourth most viewed film in its first 28 days.
Looking ahead, Netflix has high hopes for the release of Rian Johnson’s “Glass Onion: A Knives Out Story,” which is a sequel to the 2017 whodunnit “Knives Out” and played like gangbusters in Toronto. The film is taking an unorthodox release strategy by staging a one-week sneak preview run in theaters over the Thanksgiving holiday on 600 screens, but will do so a full month before it hits streaming.
While Netflix still dwarfs Disney+ in terms of subscribers, Disney on the whole last quarter in terms of its global subscribers across Disney+, Hulu, Disney+ Hotstar and ESPN+ and at the time rose to just ahead of Netflix with 221.1 million total subscribers. It led Netflix to move up the rollout of its ad-supported pricing tier to ahead of Disney+’s own planned ad-supported option arriving in December.