Netflix is scheduled to report its earnings results for the fourth quarter of 2024 on Tuesday, January 21, after markets close. Here’s a look at what to expect from the earnings report:
Adjusted Earnings Per Share (EPS): $4.225, marking a 69.2% year-on-year growth
Revenue: $10.106 billion, up 13.5% from last year
Adjusted Net income: $1.833 billion, up 69.6% from a year ago
EBITDA: $2.361 billion, reflecting operational efficiency.
Margin Continues To Be A Key Focus with 27% Guidance for 2024
Netflix is expected to release impressive results as it dominates the online streaming market. For the past eight quarters, we have seen an uninterrupted increase in its sales. During Q324, the operating revenue rose by 15% and reached $9.8 billion. For the whole nine months, it amounted to $28.8B, 16% higher YoY. Thanks to its big hits that drove viewership, including Fool Me Once, Bridgerton Season 3, Monsters: The Lyle and Erik Menendez Story, and Nobody Wants This.
From a profitability standpoint, Netflix grew its operating income by 51% YoY to $2.9B in Q3, representing a year-over-year and sequential margin expansion of 720 and 240 basis points, respectively, driven by an increase in ARM in its UCAN (United States and Canada) geography and streamlining of operating expenses. The company also anticipates a significant improvement in its operating margin, expecting it to rise to 22% for the quarter, a 5% increase year-over-year.
For the full year, Netflix is on track to achieve the high end of its revenue growth target of 14%-15%. Operating margin guidance stands at 27% for 2024, with projections reaching 28% in 2025.
However, it’s important to note that much of this optimism has already been baked into Netflix’s current stock price. Netflix’s stock performance over the past year has been remarkable. It has surged approximately 70%. As a result, the stock’s future trajectory may hinge on management’s outlook and guidance for sustained growth in the quarters ahead.
Subscriber Growth Expectations Will Beat Previous Guidance
Netflix's Q3 performance saw 5.1 million net subscriber additions, setting a strong foundation for Q4. As of Q324, its total subscriber base was already 282.7 million, an increase of 35.6M from the same quarter of 2023. In addition, the first three quarters made new 22.5M subscribers. Geographically, EMEA contributed the most with 96.1 million subscribers or 34% of the total. The US/CAN market came second with 84.8M or 30% of the total.
Netflix Subscribers
Netflix Subscribers By Region
Q4 subscriber additions could be 8.9 million subscriber additions. Major releases like the "Tyson vs. Paul" fight, NFL games, and the highly anticipated second season of "Squid Game" are expected to have bolstered its subscriber base further. This focus on high-quality, diverse programming positions Netflix as a leader in the competitive streaming market.
2024 marked the last time Netflix reported subscriber numbers, as the company shifted its focus to other performance metrics, such as revenue and profit. Analysts believe this shift is due to slower subscriber growth, leading to more scrutiny of Netflix’s advertising tier. The company’s ability to demonstrate success in advertising will be crucial to its future growth.
Content Strategy and Live Sports Expansion
Netflix's venture into live sports represents a significant evolution, with successful NFL game streams and the "Tyson vs. Paul" event.
The Tyson-Paul boxing match in November 2024 drew over 60 million households globally, while NFL games on Christmas Day averaged 26.5 million viewers in the United States. Live sports have proven to be a key factor in Netflix’s strategy to attract younger audiences and advertisers. These events not only provide stability for Netflix’s advertising model but also make accounts "stickier," meaning subscribers are more likely to stay subscribed to the platform.
A key benefit of adding sports content was its potential to boost Netflix’s ad-supported subscription tier. Advertisers typically pay a premium for ad placements during live events, making sports an important asset for Netflix.
The platform's 2025 content lineup includes WWE programming and new seasons of hit shows like "Stranger Things" and "Wednesday."
Netflix was expected to raise the price of its standard tier, which costs $15.49 a month in the U.S., in the first half of 2025. This price increase could push more subscribers to the ad-supported tier, which generates higher revenue for the platform. Netflix also projected ad revenue of $528.9 million for the fourth quarter of 2024, contributing to the company’s financial growth.
Wall Street’s Opinions
Analysts at Oppenheimer led by Jason Helfstein on Wednesday trimmed their $1,065 price target on Netflix by just a touch, cutting it to $1,040 while maintaining an "outperform" rating on the shares. The new target is about 25% above Tuesday's close.
The analysts outlook for Netflix remains positive, especially leading into the fourth-quarter earnings. He anticipates an increase in subscriber numbers, bolstered by the popularity of content such as the "Harry & Meghan" series, the NFL Christmas games, and the anticipated "Squid Game" season 2.
The analysts also foresee the full 2025 content lineup and the expansion of advertising as driving forces for growth in the first quarter.
However, valuation concerns present a notable risk, with Netflix trading at 29 times its projected 2026 earnings per share (EPS), a figure that is compounded by currency headwinds.
The analysts have slightly lowered their 2025 revenue and EPS estimates for Netflix by 4% and 6%, respectively, due to the strengthening of the dollar in the fourth quarter.
BMO Capital analyst Brian Pitz maintained Netflix with an Outperform and raised the price target from $825 to $1000.
With Monday Night Raw and exclusive U.S. rights for the 2027 and 2031 FIFA Women's World Cup events among its sports programs, the streaming behemoth is adding more. These additions coincide with successful events including NFL games broadcast last year and the boxing battle between Jake Paul-Mike Tyson.Live sports are becoming more and more popular, so Netflix seems ready to draw in fresh members, particularly with its $6.99-per-month ad-supported subscription plan.
Pitz projects a significant rise from past projections the ad-supported subscriber base might reach 90 million by year-end. The planned increase in members fits the expected change in worldwide advertising budgets to Netflix this year, which will enable higher revenue growth in the next years.
Wedbush maintains Netflix with a Buy rating and maintains a target price of $950.
Based on a survey carried out by the analysts in the US market, Netflix’s ad tier membership continues to expand but overall subscriber growth slowed in the fourth quarter.
Globally, Wedbush expects 10 million net subscriber additions, above the consensus of 9.2 million, noting positive content trends in the Latin America and Asia-Pacific regions.
Looking to Q1 2025, the analysts expect premium tier churn will increase but ad tier shifting to premium and the return of lapsed subscribers should largely offset this.
“Lapsed subscribers who plan to return will more likely opt for the ad tier, similar to recent quarters, but the mix is shifting back toward premium,” they noted.
“We think Netflix is positioned to accelerate ad tier revenue contribution for the next several years as it adds more live events, improves its advertising solutions and targeting, and utilizes new partnerships. With global content creation, balancing costs, and increasing profitability, Netflix has reached the right formula.” they said.
