Netflix subscribers surge as the company announces price hikes in some regions

Netflix (NFLX) has reported a significant increase in third-quarter subscriber figures, with nearly 9 million new subscribers. Additionally, the company has announced price hikes in the US, UK, and France, resulting in a surge in its stock during after-hours trading on Wednesday.

Starting from Wednesday, Netflix has raised the prices of its Basic and Premium plans in the US to $11.99 and $22.99, respectively, up from the previous price points of $9.99 and $19.99. Meanwhile, the $6.99 ad-supported plan and the $15.49 Standard plan will remain unchanged.

Netflix’s stock experienced a more than 12% surge

In its quarterly release, the company emphasized the competitive nature of its starting price, noting that $6.99 per month in the US is considerably lower than the average cost of a single movie ticket. Notably, this is the first time Netflix has increased its prices since March 2022.

As a result of these developments, Netflix’s stock experienced a more than 12% surge in after-hours trading.

The company’s revenue slightly exceeded its guidance, reaching $8.54 billion for the quarter, an almost 8% increase compared to the same period last year. Netflix has been implementing various revenue strategies, including its crackdown on password sharing and its ad-supported offering.

For the fourth quarter, Netflix has guided to a revenue of $8.69 billion, slightly below the consensus expectation of $8.76 billion. The company also beat estimates for earnings per share (EPS), reporting $3.73, surpassing the consensus expectation of $3.49, and exceeding the $3.10 EPS from the same period the previous year.

Netflix reported that its advertising plan continues to grow, with a nearly 70% increase in membership quarter over quarter, and 30% of users signing up for the ad-supported tier in available countries. However, the company acknowledged that there is more work to be done to scale this aspect of the business.

They announces price hike for some of its plans

Unable to boost its average revenue per membership (ARM)

The company added 8.8 million new subscribers in the quarter, surpassing the expected 6.2 million, attributing this growth to the rollout of paid sharing, strong and consistent programming, and the continued global expansion of streaming. In the third quarter of the previous year, Netflix had added only 2.41 million paying users.

Netflix anticipates that the fourth quarter’s net subscriber additions will be similar to the third quarter’s results. However, despite the surge in paying users, the company was unable to boost its average revenue per membership (ARM), which decreased by 1% year over year, in line with the company’s expectations. Netflix attributed this decline to several factors, including increased membership growth in lower ARM countries, limited price increases over the past 18 months, and some shifts in the plan mix. Nevertheless, profitability metrics like operating margin and free cash flow consistently exceeded expectations.

In the quarter, the operating margin reached 22.4%, surpassing Netflix’s own projection of 22.2%. The company expects full-year operating margins to reach 20%, at the high end of its previous forecast ranging from 18% to 20%.

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