Netflix shares soared 16% on Thursday after the company reported better-than-expected third-quarter earnings results. The streaming giant saw successes across key metrics, including a 70% increase in its new ad-supported subscription offering.
Shares Jump 16% as Earnings Top Estimates
Overall subscribers also beat estimates, with Netflix adding 8.76 million in Q3 – its biggest jump since early 2020 at the height of the pandemic.
The strong report extends Netflix’s rebound after it lost subscribers for the first time in over a decade in Q2 2022, sparking saturation fears. With momentum regained, multiple analysts expressed optimism.
Significant Subscriber Resurgence Buoys Results
A key factor in the earnings beat was Netflix’s recovering subscriber momentum after recent declines. The 8.76 million added smashed projections of 5.49 million.
Netflix also saw a boost from its password-sharing crackdown, which analysts believe will continue assisting growth into 2024.
The subscriber resurgence indicates Netflix is back on solid ground after its first net loss in 10+ years raised doubts about market saturation.
Ad Tier Success Provides New Revenue Stream
Netflix’s fledgling ad-supported tier also drove strong Q3 performance, jumping 70% ahead of expectations. While still early, the impressive ad tier adoption demonstrates its potential as an added revenue driver.
Combined with the subscriber rebound, it highlights Netflix’s levers to accelerate top-line growth.
Bullish Analysts Upgrade Stock on Future Potential
In light of the results, multiple analysts upgraded Netflix shares and boosted price targets. Morgan Stanley praised the progress towards Netflix’s growth and margin goals. Truist sees the upside ahead from password-sharing benefits and advertising.
KeyBanc believes coming pricing initiatives coupled with the $10 billion buyback authorization will further boost Netflix in 2024. The quarter renewed Wall Street’s confidence in the company’s trajectory after recent headwinds.
The better-than-expected third quarter performance shows Netflix regaining its footing after recent challenges. With initiatives like the ad tier and password sharing crackdown paying off, and subscriber growth reaccelerating, the company seems poised to sustain its momentum into 2023 and beyond.