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Netflix, which is firmly holding the reins as the dominant streaming platform, is set to report its second quarter earnings on Thursday. The report will provide keen insights into the current state of play of streaming.
Netflix’s stock has outperformed most major streamers this year, rising 36%, to about $657, since the beginning of the year. For comparison, Paramount Global and Warner Bros. Discover stocks have both slipped this year, down 26% and 36%, respectively.
Netflix is even outpacing all but two — Meta and Nvida — of the “Magnificent Seven” tech stocks.
But the world of streaming is ever changing, with new platforms emerging each year, alternate revenue models like ads becoming more prevalent, and significant mergers such as the recent Paramount-Skydance deal.
Here is what to look for in Netflix’s upcoming earnings report:
A potential dip in subscribers
In its last quarterly earnings report, Netflix warned of a potential dip in subscribers in the second quarter due to “seasonality” and the company’s crackdown on password sharing. The streaming giant also said that it plans to stop reporting subscriber stats starting in 2025, signaling a shift in focus from subscriber growth to profit.
However, JPMorgan’s Doug Anmuth, who raised his price target for Netflix to $750 on Friday, projects that Netflix will will report 5 million to 6 million net new subscribers for the second quarter, beating the FactSet consensus estimate of about 3.7 million.
Netflix’s advertising gambit
One way Netflix and other streamers are attempting to increase their profitability is by betting on ads — and it seems like Netflix is all-in on this approach.
At one point, it looked like streaming would bring the end to television commercials. Now, though, almost all streaming services offer an ad-supported plan. Netflix first introduced ads to its service in 2022.
In May, Netflix said that its ad plan has since grown to 40 million active users and that 40% of all new signups to the streaming service are for its $6.99 ad-supported tier. The company also plans 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.
More live TV
A key selling point of streaming has always been its ability to offer thousands of hours of content on demand, but in recent years streamers have noticed that live programming can drive subscriptions.
Netflix has experimented with live programming in the past and has announced some future programs, such as NFL games on Christmas and a food eating competition with 16-time hot dog eating champion Joey Chestnut and his rival Takeru Kobayashi. However, the company is still lagging behind its competition in this arena.
“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,” Paul Verna, an analyst at eMarketer, told MarketWatch.