Netflix, maintaining its position as the leading streaming platform, is slated to announce its second quarter earnings on Thursday. This report will offer valuable insights into the current streaming landscape.
Netflix’s stock has surged 36% this year, reaching about $657, outperforming most major streamers. In contrast, stocks for Paramount Global and Warner Bros. Discovery have declined by 26% and 36%, respectively. Netflix is outpacing all but two of the “Magnificent Seven” tech stocks — Meta and Nvidia.
However, the streaming industry is constantly evolving, with new platforms emerging, ad-based revenue models becoming more common, and significant mergers like the recent Paramount-Skydance deal.
Key points to watch for in Netflix’s earnings report include:
Potential Subscriber Decline
Netflix previously indicated a possible dip in subscribers for the second quarter due to “seasonality” and efforts to curb password sharing. The company also plans to stop reporting subscriber statistics starting in 2025, shifting its focus to profitability rather than subscriber growth.
Despite this, 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, exceeding the FactSet consensus estimate of about 3.7 million.
Advertising Strategy
To boost profitability, Netflix, like other streamers, is increasingly relying on ads. While streaming initially seemed poised to eliminate TV commercials, most services now offer ad-supported plans. Netflix introduced ads in 2022.
In May, Netflix reported that its ad plan had grown to 40 million active users and that 40% of all new signups were for its $6.99 ad-supported tier. The company also aims to launch an in-house advertising technology platform by the end of next year. Goldman Sachs estimates that Netflix could generate nearly $3 billion in advertising revenue in 2024.
Live TV Content
Streaming’s appeal has traditionally been its vast on-demand content library, but live programming is becoming a subscription driver. Netflix has experimented with live content and announced future programming, such as NFL games on Christmas and a food competition featuring hot dog eating champions Joey Chestnut and Takeru Kobayashi. However, Netflix is still trailing competitors in this area.
“While Netflix is the market leader and a major 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, to MarketWatch.