Netflix earnings surged last quarter. Thank ‘Squid Game,' price hikes and advertising

Los Angeles Times

6 days ago

Thanks to popular shows like 'Squid Game,' plus price hikes and growing advertising revenues, Netflix on Thursday reported strong growth in the second quarter, beating analysts' expectations.
The Los Gatos-based streamer's revenue rose 16% to $11.1 billion, while the company's net income increased 46% to $3.1 billion compared to a year earlier. Analysts polled by FactSet had expected about $11 billion in revenue and $3 billion in profit.
Wall Street analysts have long deemed Netflix the winner of the streaming wars. The company no longer gives quarterly updates on how many customers it has, last revealing it had more than 301 million subscribers in 2024. But there's still pressure on Netflix to continue to show financial growth, as the company aims to attract more advertising dollars and subscribers around the world.
Many analysts believe that Netflix's future sales boost will come from its advertising business, which began in November 2022. The streamer is expected to generate $2.07 billion in ad revenue this year in the United States, which is estimated to climb to nearly $3 billion in 2027, according to research firm Emarketer.
'They're seeing some substantial revenue and they are also getting a lot of people to sign up or switch to the ad supported tier,' said Paul Verna, a principal analyst at Emarketer.
Netflix said it expects total revenue in to grow 17% in the third quarter. The company increased its full-year 2025 revenue forecast, estimating that it will generate $44.8 billion to $45.2 billion. That's up from the range of $43.5 billion to $44.5 billion that it previously projected.
In May, Netflix said its cheaper plan with ads reaches more than 94 million monthly active users, indicating that its version with commercials is gaining traction as other services follow a similar strategy.
'We continue to make progress building our ads business and still expect to roughly double ads revenue in 2025,' Netflix said in its letter to shareholders.
Earlier this year Netflix raised prices on most of its subscription plans in the U.S. Its cheapest plan with ads went up $1 to $7.99 a month. Netflix said the response to its recent price adjustments has been 'broadly in line with our expectations.'
Netflix continues to face competition from other streaming services globally and entertainment companies like YouTube and TikTok that also take up significant amount of watch time among consumers.
During the second quarter, Netflix released popular programs including Korean animated film 'KPop Demon Hunters,' drama 'Sirens' and the third season of 'Squid Game.'
'Squid Game's' third season, which premiered late last month, was the most watched series in 93 countries during its debut week and broke a record for the most views for a show in its first three days on Netflix, a boon for a streaming service that thrives on capturing the attention of audiences worldwide by releasing must-watch programs.
'These are positive initiatives and they're the quality of the content that shows the uniqueness of it,' said Melissa Otto, head of research at S&P Global Visible Alpha, on shows like 'Squid Game' Season 3. 'These are all things that pull the users in and make them want to subscribe to Netflix or watch Netflix content.'
Netflix also has received critical acclaim for its programs, noting it has received 120 Primetime Emmy nominations for shows including the limited series drama 'Adolescence' and comedy-drama series 'Nobody Wants This.'
Netflix stock closed at $1,274.17 on Thursday, up about 2%.