Netflix, which continues to dominate the streaming industry, is set to release its second-quarter earnings on Thursday. This report will offer valuable insights into the current status of the streaming sector.
Netflix’s stock has surged 36% this year, reaching around $657. In comparison, stocks of other major streamers, Paramount Global and Warner Bros. Discovery, have declined by 26% and 36%, respectively. Netflix’s performance is only outpaced by two of the “Magnificent Seven” tech stocks — Meta and Nvidia.
The streaming landscape is constantly evolving, with new platforms regularly emerging, advertising becoming a more common revenue model, and significant mergers like the recent Paramount-Skydance deal.
Key points to watch in Netflix’s upcoming earnings report include:
A Potential Dip in Subscribers:
In its last quarterly report, Netflix warned of a potential drop in subscribers for the second quarter due to “seasonality” and a crackdown on password sharing. The company also announced plans to stop reporting subscriber numbers starting in 2025, shifting focus from subscriber growth to profitability. Despite this, JPMorgan’s Doug Anmuth raised his price target for Netflix to $750, projecting that the company will report 5 million to 6 million net new subscribers for the second quarter, exceeding the FactSet consensus estimate of about 3.7 million.
Netflix’s Advertising Strategy:
Netflix and other streamers are increasingly relying on advertising to boost profitability. Though streaming initially seemed poised to eliminate TV commercials, almost all streaming services now offer an ad-supported option. Netflix introduced ads in 2022 and reported in May that its ad plan has grown to 40 million active users, with 40% of new signups opting for the $6.99 ad-supported tier. The company plans to launch an in-house advertising technology platform by the end of next year, with Goldman Sachs estimating potential advertising revenue of nearly $3 billion in 2024.
Increased Live TV Offerings:
Streaming’s appeal has traditionally been its extensive on-demand content, but live programming is now recognized as a driver for subscriptions. Netflix has experimented with live programming and announced future shows, including NFL games on Christmas and a competitive eating contest featuring Joey Chestnut and Takeru Kobayashi. However, the company still lags behind competitors like Amazon, YouTube, Disney, and NBCUniversal in this area. Paul Verna, an analyst at eMarketer, noted that while Netflix leads in entertainment streaming, it is catching up in live events and sports.