Netflix, firmly positioned as the dominant player in the streaming industry, is set to release its second-quarter earnings on Thursday. This report will provide significant insights into the current state of streaming.
Since the beginning of the year, Netflix’s stock has risen 36% to approximately $657, outperforming most major streaming services. In contrast, stocks for Paramount Global and Warner Bros. Discovery have decreased by 26% and 36%, respectively. Netflix is also outpacing nearly all of the “Magnificent Seven” tech stocks, except for Meta and Nvidia.
The streaming landscape is continually evolving, with new platforms emerging, alternative revenue models like ads becoming more commonplace, and significant mergers such as the recent Paramount-Skydance deal.
Here’s what to watch for in Netflix’s upcoming earnings report:
Potential Dip in Subscribers
In the previous quarterly earnings report, Netflix hinted at a possible decrease in subscribers in the second quarter due to “seasonality” and a crackdown on password sharing. The company also announced plans to stop reporting subscriber statistics starting in 2025, shifting its focus from subscriber growth to profitability.
However, JPMorgan’s Doug Anmuth, who recently raised his price target for Netflix to $750, predicts that Netflix will report between 5 million and 6 million net new subscribers for the second quarter, surpassing the FactSet consensus estimate of about 3.7 million.
Netflix’s Advertising Strategy
To boost profitability, Netflix and other streaming services are increasingly incorporating ads. Netflix introduced ads to its service in 2022, and this approach seems to be paying off.
In May, Netflix reported that its ad-supported plan had grown to 40 million active users, with 40% of new sign-ups opting for the $6.99 ad-supported tier. The company also plans to launch its own advertising technology platform by the end of next year. Goldman Sachs estimates that Netflix could generate nearly $3 billion in advertising revenue in 2024.
More Live TV
Streaming services have traditionally offered thousands of hours of on-demand content, but live programming is now becoming a key driver of subscriptions. Netflix has experimented with live programming and has announced future content, including NFL games on Christmas and a food eating competition featuring champions Joey Chestnut and Takeru Kobayashi. However, Netflix still lags behind competitors in this area.
“While Netflix is the market leader and has been the biggest innovator in entertainment streaming, live events and sports are areas where it’s playing catchup with competitors like Amazon, YouTube, Disney, and NBCUniversal,” said Paul Verna, an analyst at eMarketer.