The Netflix logo is displayed above its corporate offices on January 24, 2024 in Los Angeles, California.
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Netflix will report its second-quarter earnings after the bell on Thursday, and Wall Street will be paying close attention to any details or progress the streamer provides about its advertising-supported business model.
The streaming giant launched its ad-supported tier in late 2022 and has slowly released details and metrics about the business's performance.
Here's what Wall Street expects from Netflix's second-quarter results:
- Earnings per share: LSEG expects $4.74
- Revenue: LSEG expects $9.53 billion
- Total memberships:274.4 million paid memberships, according to StreetAccount
Advertising has become an increasingly important business model for media companies to drive (or, in some cases, achieve) streaming profitability. Netflix shares have surged in recent quarters thanks to its efforts to gain subscribers in its cheapest, ad-supported tier, as well as its crackdown on password sharing.
The company has also begun adding live sports, such as NFL games on Christmas Day over the next three years, a move that will likely attract more advertising dollars for the streamer.
Netflix had approximately 270 million global subscribers at the end of the first quarter, up 16% from the same period a year ago and exceeding expectations.
When Netflix laid out its proposition to advertisers during its Upfront presentation in May, the company said its ad-supported tier had amassed 40 million monthly active users globally, nearly double the number it had shared months earlier.
Last quarter, Netflix warned investors that it would stop providing quarterly membership or average revenue per user figures starting next year, noting that the company is “focused on revenue and operating margin as our primary financial metrics, and engagement (i.e., time spent) as our strongest indicator of customer satisfaction.”
The move shows Netflix's “turnaround” from a high-growth, low-profit business to a slow-growth, high-profit business, according to an analyst note published by Wedbush last week. However, the note emphasizes that while Netflix has a big lead over its competitors when it comes to the streaming business, that turnaround is “far from complete.”
Netflix shares have risen thanks to its crackdown on password sharing and the addition of a cheaper, ad-supported tier.
“As Netflix conditions investors and journalists to focus less on subscriptions, it will put more emphasis on time spent, where its only real rival in size is YouTube,” said Ross Benes, senior analyst at eMarketer. “More live event ads will come as the company looks to improve time spent on advertising, amid an industry-wide downturn in scripted content production.”
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