The Netflix logo is shown above the company’s offices on January 24, 2024 in Los Angeles, California.
Mario Tama Getty Images
Netflix reported second-quarter earnings on Thursday that showed the media giant’s position at the head of the streaming race as it added global subscribers and saw its advertising business grow.
The streamer said its advertising-supported membership grew 34% during the period compared to the same quarter last year.
Advertising has become an increasingly important business model for media companies to increase – or in some cases, earn – profits for streaming. Netflix shares have been boosted in recent quarters by a push to acquire subscribers at a lower, ad-supported rate, in addition to cracking down on password sharing.
Shares of Netflix fell about 1.5% in extended trade after the earnings release.
Here’s how the company performed for the period ended June 30, compared to Wall Street expectations:
- Earnings per share: $4.88 vs $4.74 per share expected by LSEG
- result: $9.56 billion vs. 9.53 billion expected by LSEG
- Total members: 277.65 million global paying members vs. 274.4 million expected, according to StreetAccount
Revenue was approximately $9.6 billion, up 17% compared to the same quarter last year, driven primarily by an increase in average paid members.
Netflix said it now expects full-year reported revenue growth of 14% to 15%, compared to previous guidance of 13% to 15%.
The company reported net income of $2.15 billion, or $4.88 per share, from $1.49 billion, or $3.29 per share, during the second quarter of 2023.
Netflix’s global paid membership grew 16.5% year over year to 278 million. This is one of the last updates that Netflix will release regarding membership numbers.
Last quarter the company warned investors that it would stop providing monthly membership numbers or average revenue per user from next year, noting the company “focuses on revenue and operating margin as the main financial metrics – and engagement (i.e. time spent) is the most good. proxy for customer satisfaction.”
Netflix’s stock has been boosted by password-sharing breaches and lower-level, ad-supported add-ons.
Netflix began to focus on various business strategies to drive revenue growth after the streamer saw slow subscriber growth in 2022. In May, Netflix said it would launch its own advertising platform and no longer partner with Microsoft for the technology. The company is also starting to add live sports, such as NFL games on Christmas Day over the next three years, a move that will attract more advertising dollars for streamers.
The company says its lower, ad-supported rate has gained traction, with its customers accounting for more than 45% of sign-ups in markets where the option is offered.
However, Netflix noted on Thursday that its ad-supported business is still young, and that it does not expect ad revenue to be “the main driver of revenue growth in 2024 or 2025.”
“The near-term challenge (and medium-term opportunity) is that we are outpacing our ability to monetize our growing ad inventory,” the company said in an earnings release.
On this note, Netflix adds confidence that it is on track to “remove the scale of critical ad subscribers for advertisers” by 2025, in order to increase its ad-level membership in 2026 and beyond.
Netflix founder Reed Hastings admitted at the end of 2022 that he is slowly offering cheaper and ad-supported options to customers as he focuses on digital competition from Facebook and Google.
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