An analyst says he sees Netflix Inc. continuing its impressive run of growth into next year after the streaming giant beat expectations across the board when it reported third-quarter earnings Thursday.
“I think this is just another in a strong line of quarters for Netflix,” Jawad Hussain, media and entertainment director at S&P Global Ratings, told BNN Bloomberg in a Friday interview.
“Ever since they put in place their paid sharing initiative a little over a year ago, you’ve seen phenomenal growth and a reacceleration of growth. In the past five quarters they’ve added almost 50 million subscribers, now up to almost 285 million… far outpacing the rest of the industry.”
The company began cracking down on password sharing in the spring of 2023 in order to boost revenues and grow its subscriber base after estimating that some 100 million people worldwide were using other users’ passwords to access Netflix’s collection of movies and TV shows.
Hussain said that while much of Netflix’s recent success can be attributed to the company simply converting password-sharers into paying users, and that subscriber growth is likely to moderate in the coming months, the streamer still has other ways to continue growing revenues.
“It’s probably going to be a little bit less of a driver going forward, but they’ve been focusing on getting customers into the lower ad-supported tier, which they’re seeing good growth on,” he said.
“You know, 2024 was kind of a year of building that up and getting scale and they weren’t expecting to see the benefits of that until 2025, and then you have a slate of content that’s very live focused.”
Hussain added that the company is embracing live sporting events like boxing and football, which will further increase revenue as viewers and advertisers move from tradition television to online streamers.
“The amount of ad money that’s in television that’s going to be migrating from linear to streaming is significant, and Netflix wants to get their fair share of that pie,” he explained.
“And part of that is you need to have event-driven programming, and sports still are the biggest events out there.”
Hussain said that Netflix’s willingness and ability to adapt in the digital entertainment industry is what has allowed the company to hold on to its significant market share even as a number of competitors have entered the space in recent years.
“This company has shown time and time again that they’re very good at innovating and at maintaining their dominance and at making good content,” he said.
“I think they continue to show that they can innovate, they can change course as needed and continue to grow and I think the management team has demonstrated that it knows how to navigate this fast-evolving industry.”
Shares of Netflix were up roughly 10 per cent -- reaching an all-time high -- in Friday afternoon trading on the Nasdaq Composite.