LOS GATOS, Calif.—Netflix posted very strong Q2 2024 financials, with global Netflix subs growing 16.5% to 277.65 million, revenue up 17% and operating income spiking up 42% compared to a year earlier. Overall Q2’24 earnings per share was $4.88 vs. $3.29, up 48% YoY with an operating margin of 27% for the quarter.
In the U.S. and Canada paid memberships were up from 82.658 million in Q1 to 84.109 million in Q2 2024. That is significantly more subs than it had in Q2 2023, when it reported 75.571 million paid memberships.
Despite the strong growth, which exceeded subscriber estimates, Netflix stock was down slightly in after hours trading because its revenue outlook were below Wall Street’s expectations.
The letter to shareholders also reported that “We’re making steady progress scaling our ads business. Ads tier membership grew 34% quarter on quarter, and we’re building an in-house ad tech platform that we’ll test in Canada in 2024 and launch more broadly in 2025.”
Netflix also noted that 45% of new signups are now for the ad supported tier.
Netflix has been leading a trend in the streaming industry towards pushing subscribers into tiers with ads and it is phasing out its basic $11.99 ad-free tier.
“Given this sustained progress, we believe that we’re on track to achieve critical ad subscriber scale for advertisers in our ad countries in 2025, creating a strong base from which we can further increase our ad membership in 2026 and beyond,” the shareholder letter said. “Our ad revenue is growing nicely and is becoming a more meaningful contributor to our business. But building a business from scratch takes time — and coupled with the large size of our subscription revenue — we don't expect advertising to be a primary driver of our revenue growth in 2024 or 2025. The near term challenge (and medium term opportunity) is that we’re scaling faster than our ability to monetize our growing ad inventory. It’s why continuing to build our ad sales, measurement and tech capabilities is so important. Based on everything we’ve learned and our progress over the last 18 months — we’re confident that advertising will be a key component of our longer term revenue and profit growth.”
