Netflix, the leading streaming platform, is poised to report its second-quarter earnings on Thursday, offering valuable insights into the current streaming landscape.
Netflix’s stock has surged by 36% this year, reaching around $657. In contrast, stocks for Paramount Global and Warner Bros. Discovery have dropped by 26% and 36%, respectively. Netflix is outperforming most major streamers and is ahead of all but two of the “Magnificent Seven” tech stocks—Meta and Nvidia.
The streaming industry, however, is constantly evolving. New platforms emerge yearly, ad-based revenue models gain traction, and significant mergers, such as the Paramount-Skydance deal, reshape the market.
Here are key points to watch in Netflix’s upcoming earnings report:
A potential dip in subscribers:
Netflix warned in its last quarterly report of a possible decline in subscribers due to “seasonality” and a crackdown on password sharing. The company plans to stop reporting subscriber stats in 2025, shifting focus from subscriber growth to profitability. JPMorgan’s Doug Anmuth, who increased his price target for Netflix to $750, predicts Netflix will report 5 million to 6 million net new subscribers for the second quarter, surpassing the FactSet consensus estimate of about 3.7 million.
Netflix’s advertising strategy:
Netflix, like other streamers, is increasingly relying on ads to boost profitability. Initially, streaming was seen as a potential end to TV commercials, but now almost all services offer ad-supported plans. Netflix introduced ads in 2022, and by May, its ad-supported tier grew to 40 million active users, with 40% of new signups choosing the $6.99 ad-supported plan. The company plans to launch an in-house advertising technology platform by the end of next year. Goldman Sachs estimates Netflix could generate nearly $3 billion in ad revenue in 2024.
More live TV:
Streaming’s key appeal has been on-demand content, but live programming is driving subscriptions. Netflix has experimented with live content and announced future programs, including NFL games on Christmas and a food-eating competition featuring Joey Chestnut and Takeru Kobayashi. However, Netflix is still catching up to competitors like Amazon, YouTube, Disney, and NBCUniversal in live events and sports.
“While Netflix is the market leader and a major innovator in entertainment streaming, it is still playing catchup with competitors in live events and sports,” said Paul Verna, an analyst at eMarketer, to MarketWatch.