Netflix Added Nearly 9 Million Subs in Its ‘Suits’ Quarter
What did you do this summer? Netflix added a ton of subscribers and made a bunch of money.
The streaming giant onboarded 8.76 million subscribers from July to September and now has a total of 247.15 million global paid subs. That’s a significant improvement over the 5.89 million people it added during the prior quarter. Netflix previously predicted about the same number would join in Q3 — talk about tempering expectations.
It was the same story with the company’s financial results. Netflix posted $3.73 of earnings per share (EPS) on $8.542 billion in revenue for the summer quarter. Netflix met or exceeded pretty much all financial forecasts for the quarter — including its own.
Wall Street anticipated Netflix Q3 EPS of $3.49 on revenue of $8.54 billion, according to estimates compiled on Yahoo Finance. Netflix’s previous guidance foresaw its own earnings per share coming in at $3.52 on $8.52 billion in revenue.
Netflix reported Q3 operating income of $1.916 billion; it previously guided to $1.890 billion. Net income was $1.677 billion; the company guided to $1.580 billion.
The streaming leader’s third-quarter UCAN (U.S. and Canada) average revenue per member (ARM to Netflix, what almost all other companies refer to as ARPU — average revenue per user) was $16.29. The company’s previous guidance predicted it would be “flat to slightly down” from the $16 it posted last quarter. Nope, it was slightly up.
Netflix upped its full-year 2023 free cash flow forecast from “at least” $5 billion to $6.5 billion — a significant increase due in large part to the writers and actors strikes shuttering production spend.
Traders took notice of the numbers. While shares of Netflix (NFLX) closed Wednesday’s regular trading day at $346.19, they immediately rose double digits (on a percentage basis) after the shareholder letter came out.
Netflix credited its newest monetization initiatives for the strong quarter. The company rolled out its “paid sharing” plan targeting password sharers in the U.S. midway in the second quarter, making Q3 its first full three-month period to crack down on account-sharers. The effort has been fairly successful, though the full recognition of its revenue potential will take more time.
Another revenue-raising effort, Netflix with ads, got out of the gates much slower. To that end, ad sales chief Jeremi Gorman is out after about a year in the role, and Amy Reinhard has been elevated to the top advertising job. During the latest quarter, membership on the ad-supported tier “increased nearly 70 percent quarter-over-quarter and now accounts for (about) 30% of all new sign-ups in our 12 ads countries,” Netflix said.
The company also confirmed (and clarified) that whole price-increase thing. Starting today, Netflix is increasing its Basic plan from $9.99 per month to $11.99 in the U.S. and its Premium plan from $19.99 to $21.99. Netflix with Ads ($6.99/month) and the popular Standard plan ($15.49/month) will stay the same. Read more about that here.
“Suits” was the streamer’s big acquisition of Q3, and Netflix says it will look for more opportunities to license more established outside titles. In terms of Netflix originals, “One Piece” had the biggest individual weeks of the summer and “Virgin River” Season 5 was a welcome return. Netflix (finally) shut down its DVD-by-mail business on the final business day of the third quarter.
