Netflix is set to report its second-quarter earnings, and analysts will be closely watching for any updates on the streamer’s advertising-supported business model. The company launched its ad-supported tier in 2022 and has gradually released information on its performance.
Wall Street expects Netflix to report earnings per share of $4.74 and revenue of $9.53 billion. The streamer currently has 274.4 million paid memberships. Advertising has become an important revenue stream for media companies, and Netflix has been focusing on gaining subscribers for its cheaper, ad-supported tier.
In addition to its ad-supported model, Netflix has been adding live sports content to its platform, such as NFL games on Christmas Day for the next three years. This move is expected to attract more advertising dollars for the company.
During its Upfront presentation in May, Netflix announced that its ad-supported tier had reached 40 million global monthly active users, nearly double the previous figure. However, starting next year, Netflix will no longer provide quarterly membership numbers or average revenue per user. The company is shifting its focus to revenue, operating margin, and engagement as key metrics.
Analysts believe that this decision reflects Netflix’s transition from a high-growth, low-profit business to a slow-growth, high-profit business. While Netflix currently leads the streaming industry, this pivot is still a work in progress.
Netflix’s crackdown on password sharing and the introduction of a cheaper, ad-supported tier have boosted its stock. The company is now shifting its emphasis from subscription additions to time spent on the platform. YouTube is seen as Netflix’s main rival in terms of time spent, and the streamer is expected to announce more live events to improve its ad-supported time spent.
In conclusion, Netflix’s second-quarter earnings report will provide insights into the performance of its advertising-supported business model. The company’s focus on revenue, operating margin, and engagement reflects a shift towards a slower-growth, higher-profit strategy. As it continues to add live sports and improve its ad-supported time spent, Netflix aims to solidify its position as a leader in the streaming industry.
