Netflix tops subscriber targets as ad-tier signups grow

By Lisa Richwine and Dawn Chmielewski

LOS ANGELES (Reuters) -Netflix picked up 5.1 million streaming subscribers in the third quarter, topping Wall Street estimates by more than 1 million users, and said it expected higher customer growth around the holidays when Korean drama “Squid Game” returns.

Shares of Netflix (NASDAQ:) rose 3.5% to $711.98 in after-hours trading following the earnings report on Thursday.

Investors had expected Netflix to bring in 4 million subscribers from July through September, according to analysts’ estimates compiled by LSEG. New programming during the period included murder mystery “The Perfect Couple” and romantic comedy “Nobody Wants This.”

Diluted earnings per share landed at $5.40, above the consensus forecast of $5.12. Revenue hit $9.825 billion, just ahead of the $9.769 billion consensus forecast.

The company projected its customer additions for the last three months of the year, traditionally a strong period around the Christmas holiday, would outpace the September quarter, though it did not provide a number.

Netflix has been trying to shift investor attention away from subscriber sign-ups to other metrics, including revenue growth and profit margins. The company said its operating margin hit 30% in the quarter, compared with 22% a year earlier.

“We’ve delivered on our plan to reaccelerate our business, and we’re excited to finish the year strong with a great Q4 slate,” the company said in a letter to shareholders. New programming will include the second season of Korean drama “Squid Game.”

The company said its programming volume had picked up following disruptions from last year’s Hollywood strikes. Engagement, the time spent watching Netflix, averaged two hours per day per member.

Nearly two years into its advertising business, Netflix is working to increase revenue from ad-supported plans but has said it does not expect advertising to become a primary growth driver until 2026.

In the September quarter, Netflix’s ad-supported service accounted for more than 50% of signups in countries where it was available.

Part of the plan centers around live events including sports, a big draw for advertisers. In November, Netflix will stream a fight between YouTube star Jake Paul and Mike Tyson, followed by its first NFL games in December.

“Advertisers want to be part of big cultural moments. Compelling live programming will always amass and unite people for a snapshot in time,” said Forrester’s research director, Mike Proulx. “For brands, that’s a captive audience who’s ripe for advertising messages.”