In the third quarter of 2024, Netflix achieved revenue of $9.82 billion, acquiring 5.07 million new subscribers during that time. These figures form the foundation upon which the company's current market valuation and its aggressive growth strategy are built in the face of a saturated global VoD market. Investors are no longer looking solely at user base growth dynamics, but are increasingly closely tracking the operating margin and earnings per share, which in this quarter have outlined a new trajectory for the Los Gatos giant.
Financial results: $9.82 billion in revenue
The achieved revenue of $9.82 billion represents a 15% increase year-over-year. In the third quarter of 2023, the company reported revenue of $8.54 billion. This change of over $1.2 billion is not a coincidence, but the result of consistent price list optimization and the full implementation of ad-supported plans in key markets. Operating profit for the reported period was $2.9 billion, which translates to an operating margin of 30%. For comparison, in the same quarter last year, this margin hovered around 22%. The jump of 8 percentage points shows that Netflix has effectively managed the burden of operating costs while simultaneously increasing the efficiency of spending on original productions.
Earnings per share (EPS) reached $5.40, which significantly exceeded the expectations of Wall Street analysts, who had a consensus forecast of around $5.10. This difference between forecasts and reality strengthened the position of Netflix shares on the Nasdaq stock exchange. The company not only generates cash but knows how to retain it, which is visible in free cash flow of $2.2 billion for the third quarter alone. Investors received a clear message: the business model, which just two years ago raised doubts due to massive debt and high production costs, has become a profit-generating machine.
The revenue structure has changed. Netflix has ceased to be a platform that monetizes only content access. The introduction of ads has changed the ARPU (Average Revenue Per User) structure. Although subscriber growth has slowed in some regions, revenue per user in ad-supported plans and higher fees for account sharing (so-called paid sharing) have more than compensated for the lack of "cheap growth." In an official letter to shareholders, the company's management indicated that these two factors – ads and paid sharing – are the main growth engines for the coming quarters.
Subscriber base growth of 5.07 million
Acquiring 5.07 million new subscribers in the third quarter of 2024 is a result that should be analyzed in the context of quality, not just quantity. Unlike the years 2020-2021, when Netflix grew thanks to global lockdowns, the current growth is the result of precise targeting and the elimination of gaps in the subscription model. Each of these 5.07 million viewers is a person who decided on paid access in a world where competition in the form of Disney+, Max, or Amazon Prime Video is constantly fighting for the same airtime.
It is worth looking at the geographical distribution of these gains. North America, being the most saturated market, shows stability that was a surprise to many analysts. Instead of the expected outflow of users after price hikes, Netflix recorded growth. This is proof that the service has become a staple for the American viewer. Europe and Asian markets account for the majority of the new growth, which suggests that Netflix still has potential for expansion beyond mature markets, although the cost per acquisition (CAC) in these regions is rising.
The user retention strategy is currently based on the so-called "premiere grid." Instead of releasing entire seasons of series at once, Netflix is increasingly splitting them into parts, forcing the viewer to stay on the platform longer. This directly translates into a lower churn rate. 5.07 million new people in the system is not just a one-time subscription payment; it is primarily an expansion of the base that will generate ad revenue in subsequent quarters. This model is mathematically safer for the company than relying solely on subscriber growth, as it reduces dependence on seasonal hits.
Analysis of business model efficiency
In the face of reaching $9.82 billion in revenue, Netflix management has revised its approach to content spending. Instead of increasing production budgets indefinitely, the company has focused on selecting projects with the highest viral potential. In the third quarter of 2024, content costs amounted to approximately $4 billion, which, with revenue of $9.82 billion, shows that the company is maintaining financial discipline. The ratio of revenue to production costs is currently the healthiest in the company's history.
The efficiency of the business model is also visible in the way data is used. Netflix does not create content for "everyone." Analyzing viewer behavior allows for the creation of productions aimed at specific niches that attract a loyal audience. This approach ensures that every dollar spent on production has a higher return on investment (ROI). An operating profit of $2.9 billion is a direct result of this optimization. The company no longer burns capital on productions that do not build long-term library value.
An additional element increasing efficiency is license sales. Netflix, which for years was a "walled garden," has started making selected older titles available to other broadcasters. This is pure profit, as these contents have long since been amortized, and every licensing fee from a competitor feeds directly into operating profit. Such a move shows the maturity of the management – the company has stopped fearing competition to an extent that would paralyze its business decisions.
Investors value Netflix not only as a streaming platform but as a technology platform with huge potential in programmatic advertising. The advertising market in streaming services (AVOD) is growing at a double-digit rate, and Netflix, thanks to its massive database of viewer preferences, is able to offer advertisers precision that traditional television will never achieve. It is this segment that will push revenue beyond the current $9.82 billion in the coming years.
Comparison of growth dynamics in 2024
Comparing the results from the third quarter of 2024 to previous quarters of the same year, a clear trend of margin stabilization is visible while maintaining revenue growth. In the first quarter of 2024, revenue was $9.37 billion, in the second $9.56 billion, and the third quarter brought $9.82 billion. This sequence shows that Netflix is not growing in leaps and bounds, but is consistently building its advantage. Each quarter adds about $200-300 million to the revenue base.
The aforementioned 5.07 million new subscribers should be compared with the results from the first two quarters, where growth was at a similar level. This means that the company has entered a phase of "predictable growth." For Wall Street, this is more important information than any single hit series. Stability allows for more accurate investment planning, which in turn reduces risk for shareholders.
The year 2024 is for Netflix a year of "operational maturity." Compared to 2023, when the company introduced drastic changes to the terms of service regarding account sharing, 2024 is marked by the consolidation of these changes. The market has become accustomed to the new payment model, and the user resistance that was speculated about turned out to be marginal. Revenue growth of 15% year-over-year while simultaneously increasing operating profit by over 30% in comparative terms confirms that the "paid sharing" strategy was one of the most successful moves in the history of the media industry.
Impact of content on quarterly results
In the third quarter of 2024, Netflix proved that the premiere calendar is no longer a matter of chance, but a precisely designed financial strategy. The successes of specific productions that attracted millions of viewers this quarter had a direct impact on the number of sign-ups for ad-supported plans. Viewers choosing a cheaper subscription are more likely to decide to purchase access because of a specific title that has dominated social media debate.
The company has also changed its genre mix. Instead of relying solely on expensive blockbusters, Netflix has increased the share of local content, which is cheaper to produce and enjoys huge popularity in markets outside the USA. The success of productions from Korea, Spain, or Poland allows for a reduction in the average cost of acquiring a viewer. This is key to maintaining a high operating margin. In the third quarter of 2024, the $9.82 billion in revenue largely stems from the fact that Netflix no longer has to rely on one global hit that must please everyone.
It should be noted, however, that this strategy requires a constant flow of new releases. If there is a gap in the library, users react very quickly by canceling their subscription. Netflix is balancing on the edge – on one hand, it must maintain quality, and on the other, it cannot exceed a certain level of content spending. The current $4 billion per quarter is the golden mean that allows for maintaining a base of 5.07 million new viewers without overly burdening the company's balance sheet.
Forecasts for subsequent quarters after Q3 2024
Looking at the results from the third quarter of 2024, conclusions can be drawn about the direction in which the company is heading. Netflix will no longer seek rapid user growth because the ceiling in developed countries is already close. Instead, the company will focus on increasing ARPU. This means price hikes in selected regions and more aggressive monetization of ad-supported plans.
Financial analysts forecast that in subsequent quarters, revenue will grow by about 10-12% year-over-year. This is a safe assumption that takes into account both the potential for growth in emerging markets and the limited possibilities for raising prices in mature markets. The company faces the challenge of maintaining viewer loyalty in a world where subscriptions are increasingly "rotational" – users buy access only for the duration of a specific series. Netflix will have to find a way to turn these viewers into permanent subscribers.
One of the tools is to be the development of the games section and live broadcasts, including sports events. Although the share of these segments in the total revenue of $9.82 billion is currently small, they are an important element of the "attention retention" strategy. If Netflix manages to create an ecosystem where the viewer not only watches series but also uses other forms of entertainment, the operating margin could exceed the current 30% in the long term.
Competition in the form of Amazon Prime Video, which is increasingly focusing on live sports, forces Netflix to react. The company cannot afford to be idle. Therefore, the coming months will be a period of testing new entertainment formats. The market will be watching to see if these investments negatively affect earnings per share. The current financial condition allows for experiments, but investor patience has its limits. Every dollar spent on games or sports must bring a measurable return in the form of reducing the subscriber churn rate.
What this means for you
As an investor or market observer, you must understand that Netflix has ceased to be a growth company in the traditional sense of the word and has become a "dividend and share buyback machine." The result of $9.82 billion in revenue and 5.07 million new viewers is confirmation that the strategy of monetizing the base, rather than just expanding it, is working. For the average user, this unfortunately means fewer attractive price offers and increasing fragmentation of the offering. The platform will try to squeeze as much as possible out of every profile, which, given the current market saturation, is the only way to increase the company's value.
In the long term, Netflix will have to face the question of the upper price limit for a subscription. If price hikes start to exceed the value of the entertainment provided, the base of 5.07 million new viewers may start to melt away. However, for the moment, the numbers speak clearly: Netflix is winning the race for the viewer's attention and money, and its advantage over the competition is greater than ever. The key to success in the coming quarters will not be so much the number of new users, but the ability to retain current ones while simultaneously increasing the average revenue per profile.
Q&A
By how much exactly did the number of Netflix subscribers increase in Q3 2024?
In the third quarter of 2024, Netflix's subscriber base grew by exactly 5.07 million users.
What was Netflix's revenue in the third quarter of 2024?
The company's revenue in the third quarter of 2024 amounted to $9.82 billion, which is a 15% increase year-over-year.
Did the company provide the earnings per share (EPS) value?
Yes, earnings per share for the third quarter of 2024 amounted to $5.40, which significantly exceeded analyst consensus.
What was the operating margin in the described period?
Netflix's operating margin in the third quarter of 2024 was 30%, which marks a significant improvement compared to 22% in the same period last year.
Is Netflix planning further changes to its business model?
The company's management points to further optimization of ad-supported plans and paid account sharing as the main pillars of revenue growth in subsequent periods, while simultaneously limiting unprofitable production spending.
What is the situation with free cash flow?
Free cash flow amounted to $2.2 billion in the third quarter of 2024, which confirms the company's high ability to generate cash after paying operating and investment costs.
Does the competition currently have a major impact on the company's results?
Although the streaming market is highly competitive, Netflix's results for the third quarter of 2024 show that the company maintains a dominant position, effectively converting viewer attention into stable revenue, which allows it to fend off price pressure from other VOD services.
Sources
Article prepared by the Wiadomości PRO editorial team with the support of artificial intelligence. Facts come from the sources listed above.
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