Netflix Q3 Earnings Preview: Eyes Price Hikes and Ad Revenue Growth

Netflix is set to release its Q3 earnings report on Thursday, after the market closes on October 17, kicking off the tech sector's earnings season. Wall Street has high expectations, based on Bloomberg's consensus estimates:

- **Revenue:** Expected to reach $9.78 billion (slightly above Netflix's guidance of $9.73 billion), compared to $8.54 billion in Q3 2023.

- **Earnings per share (EPS):** Predicted at $5.16 (higher than Netflix's guidance of $5.10), versus $3.73 in Q3 2023.

- **Net subscriber additions:** Forecasted at 3.9 million.

One of the key potential catalysts for Netflix's stock is the possibility of price hikes. Given Netflix's low cost per viewed hour, we see scope for the firm to raise US prices by 12% in 2025, said Citi analyst Jason Bazinet. Besides a potential price increase, investors will be closely watching updates on Netflix's growing advertising business. Last quarter, Netflix revealed it had secured a 150% plus increase in upfront ad sales commitments over 2023.

According to Wedbush analyst Alicia Reese, Netflix is positioned to accelerate ad-tier revenue contribution into year-end and 2025 as it improves its advertising solutions and targeting, utilizes new partnerships, and adds more live events. Reese believes the ad-tier could become the platform's primary growth driver by 2026.

Netflix is also focusing on live sports and expanding its most popular shows.

However, Netflix faces challenges, as spending on streaming services in U.S. households appears to have peaked. 

Netflix also faces increasing competition from other streaming platforms. On average, U.S. consumers subscribe to four streaming services and spend about $61 per month, according to Deloitte's latest Digital Media Trends report. Retaining subscribers long-term remains a challenge, as consumers frequently cancel or churn out of their streaming subscriptions.