During the April-June period, Netflix likely saw its fewest subscriber additions in five quarters, with an estimated 4.82 million new subscribers, according to LSEG data. This marks a significant drop from the 9.3 million added in the previous quarter and is the lowest since Q1 2023. The slowdown follows sharp gains from a crackdown on password sharing, as well as viewers’ attention shifting to summer sporting events like the Euro soccer tournament.
Despite this, Netflix’s efforts to introduce a lower-priced ad-supported tier have resulted in substantial ad revenue growth. The company’s ad revenue is expected to have more than doubled in the June quarter. Overall, Netflix’s revenue likely increased by 16.4% to $9.53 billion, the fastest growth since Q2 2021. Popular original shows such as “Bridgerton” and “Baby Reindeer” topped the most-watched charts, according to Nielsen data.
As Netflix prepares to report its second-quarter results on Thursday, investors will focus on the company’s expansion of its ad-supported plan and look for updates on new growth drivers. In May, Netflix announced that its ad-supported tier had reached 40 million monthly active users globally, accounting for 40% of all sign-ups in available countries, up from 23 million in January.
This ad push has been well-received by investors, with Netflix’s stock up nearly 35% for the year, compared to a 19% return on the S&P 500 index. Seasonal trends, such as summer travel and the upcoming Olympic Games, are expected to impact viewership for Netflix and its rivals, including Disney+.
Brokerage MoffettNathanson noted that Netflix, after significant investment in original content, also drives viewership with acquired shows like “NCIS” and “Grey’s Anatomy,” which dominated the top 20 streamed titles. Netflix has announced bundling partnerships, such as with Comcast’s Peacock streaming service and Apple TV+ for Xfinity customers. Additionally, Netflix is increasing its live content offerings, including streaming two National Football League games on Christmas Day, to create more advertiser-friendly events.
To boost its ad-supported growth, Netflix announced plans in May to develop an in-house ad technology platform, providing marketers with more tools to buy and measure ads. Initially, Netflix relied on Microsoft to build the ad tier’s backbone.
Despite this progress, BofA Global Research analyst Jessica Reif Ehrlich notes that advertising is a long-term strategy and doesn’t expect significant revenue contributions until 2025.
