Netflix's Q4 Earnings: Analysts Predict 57% Net Member Adds Boost

Netflix (NFLX) is gearing up for its fourth-quarter earnings report, with analysts forecasting a significant boost in net member additions. The streaming giant is expected to report earnings on Tuesday, January 21, after the market close. Here's a closer look at what to expect from Netflix's Q4 earnings:

Revenue and Earnings

Netflix has guided for revenues of $10.13 billion for the fourth quarter, representing a growth of nearly 15% from the year-ago period. Analysts' targets match this number. In the third quarter of 2024, revenues grew 15% year-over-year to $9.8 billion.

The company expects net income to be $1.85 billion, or $4.23 per share, in Q4 2024. Analysts are predicting earnings of $4.20 per share. This compares to net income of $938 million, or $2.11 per share, in Q4 2023. In Q3 2024, net income grew over 40% YoY to $2.36 billion, or $5.40 per share.



Net Member Adds

Analysts on average expect Netflix's earnings to increase 99% year-over-year to $4.21 per share, according to FactSet. Sales are projected to rise 15% to $10.1 billion. In a note to clients Tuesday, Evercore ISI analyst Mark Mahaney said he expects Netflix to beat expectations for sales and earnings while meeting expectations for its sales outlook.

"While we expect incremental negative FX impact to revenue vs. our assumptions at the time of Netflix's Q3 earnings report on Oct. 17, we continue to view the Street's Q4 Revenue, Operating Margin (21.9%) and earnings-per-share estimates as likely reasonable," Mahaney wrote.

Mahaney and Evercore rate Netflix stock as outperform. In a survey the firm published in December, Evercore found that 58% of Americans said they had watched a movie or show on Netflix in the past year. That topped 54% for Amazon Prime, 44% for Hulu, 40% for YouTube and 28% for HBO Max.



Live Sports and Ad-Supported Tier

Netflix's push into live sports and the launch of its ad-supported tier are expected to be key drivers for subscriber growth and retention. The company recently secured the exclusive U.S. rights to broadcast FIFA's Women's World Cup in 2027 and 2031, adding to its growing list of live sporting events.

The ad-supported tier, launched in October 2024, has been gaining popularity, accounting for over 50% of sign-ups in its ad countries. Analysts like Mark Mahaney from Evercore ISI expect the ad tier to drive accelerating net member adds in 2025, as it is attractive for value-conscious consumers, especially in a potential recession.

Cowen analyst John Blackledge is also bullish on Netflix's ad-supported tier, forecasting that the streamer will end 2023 with 8 million global ad-tier subscribers, with that base rising to around 43 million by 2028.



Password Sharing Crackdown

Netflix is expected to provide an update on its crackdown on password sharing, which could have a significant impact on subscriber numbers and revenue. The company has been testing different approaches to monetize password sharing, such as charging extra for additional screens or households. While some users may decide to pay for additional screens, others may choose to cancel their subscriptions due to the increased cost. However, the overall impact on subscriber numbers is expected to be minimal.

In conclusion, Netflix's Q4 earnings report is expected to reveal strong subscriber growth, driven by its push into live sports and the launch of its ad-supported tier. Analysts predict a 57% net member adds boost, with revenue and earnings growth also expected to be strong. The company's crackdown on password sharing is also expected to have a significant impact on subscriber numbers and revenue.