Netflix (NFLX) stands tall in a heavily competitive streaming landscape

Shares of Netflix, Inc. (NASDAQ: NFLX) were down over 2% on Friday. The stock has gained 27% over the past three months. The streaming giant continues to hold its ground and deliver strong results in an increasingly competitive environment. This momentum is expected to continue in the upcoming fiscal year as well. Here are a few notable points:

Strong performance

Netflix continues to deliver strong top and bottom line growth. In the third quarter of 2024, revenues increased 15% year-over-year to $9.8 billion while earnings per share grew 45% to $5.40. Operating margin expanded to 30% in Q3 from 22% in the year-ago period.

The company has witnessed a consistent growth in subscribers. In Q3, global streaming paid memberships rose 14% YoY to 282.72 million. NFLX added 5.07 million new members in the quarter. The company has a strong content slate and continues to benefit from healthy engagement. Shows such as The Perfect Couple and Nobody Wants This are popular on its platform along with movies such as The Union and Rebel Ridge.

Netflix’s strategy of investing in a variety of content suited to various regional preferences is paying off. In terms of engagement, the company has seen a steady rise in view hours per member amongst owner households. Its paid sharing initiative and the expansion of its ad tier are generating benefits.

Netflix is making progress in its advertising business. In Q3, its ads plan accounted for over 50% of sign-ups in its ads countries and membership on the ads plan grew 35% quarter-over-quarter. It is also seeing healthy engagement on its ads plan.

Encouraging outlook

For the fourth quarter of 2024, revenue is expected to grow 15% YoY to $10.1 billion. The company expects EPS of $4.23 which compares to EPS of $2.11 reported in the year-ago period. Operating margin is expected to be 22% compared to 17% last year. Paid net additions are expected to see sequential growth due to normal seasonality and a strong content slate.

Based on its Q4 guidance, NFLX forecasts YoY revenue growth of 15% for full-year 2024, at the high end of its 14-15% revenue growth expectation. Operating margin is expected to be 27%, up 6 percentage points from last year.

For fiscal year 2025, Netflix expects to deliver revenue and profit growth by improving its core series and film offering and investing in new initiatives like ads and gaming. The company is currently forecasting revenue of $43-44 billion for FY2025. This represents growth of 11-13% off of its 2024 revenue guidance of $38.9 billion. Revenue growth is expected to be driven by increases in paid memberships and average revenue per membership (ARM). Operating margin is expected to be 28%.