Key points:

  • Netflix may report its slowest subscriber growth in the past six quarters.
  • Some experts suggest Netflix raise prices and phase out some ad-free plans to encourage users to switch to more expensive tiers.
  • Investors are concerned about slowing subscriber growth and low ad revenue.

On Thursday, Netflix will release a report that could show the slowest growth in subscriber numbers over the past six months. This slowdown could be due to the reduced effectiveness of measures to combat password sharing and investors’ expectations for accelerated growth in the company’s new revenue stream — advertising.

In this context, investors will closely scrutinize data on subscriber growth trends and the effectiveness of the company’s advertising strategy. The published report will provide insight into how well Netflix is handling current challenges and executing its plans to diversify revenue sources.

Subscriber data could lower Netflix stock after the report

According to estimates from the London Stock Exchange Group (LSEG), the streaming giant Netflix likely attracted around 4 million new subscribers in the third quarter. Meanwhile, according to Nielsen, Netflix original films such as “The Accident” and “The Perfect Couple” ranked among the most popular in the U.S. during this period.

To divert investors’ attention from the slowdown in subscriber growth, Netflix is focusing on other performance metrics, such as revenue growth and profitability. The company also announced it would stop reporting subscriber numbers starting in 2025.

Despite the growth in ad-supported subscription plans, the company doesn’t provide detailed financial information about this segment and does not expect it to become a key growth driver until 2026.

This uncertainty raises some concerns about Netflix’s future growth trajectory. According to eMarketer analyst Ross Benes, the company earns less than a billion dollars annually from advertising in the U.S., which falls short of its ambitions.

Some experts believe Netflix needs to raise subscription prices and gradually phase out most ad-free plans to push users toward more expensive, ad-supported tiers that offer higher revenue per user.

Netflix’s current ad revenue

In July last year, Netflix announced it would gradually discontinue its basic plan priced at $9.99 per month without ads for new users in the U.S. and U.K. Existing subscribers on this plan will also be gradually transitioned to other plans.

Currently, in the U.S., the company offers an ad-supported plan for $6.99 per month and a standard ad-free plan for $15.49 per month. The price of the standard plan has remained unchanged since early 2022, while the ad-supported plan has maintained its price since its launch in late 2022.

According to LSEG’s average analyst estimates, Netflix is expected to generate $242.7 million in advertising revenue in the third quarter. The company’s total revenue is projected to grow by 14.3% compared to the previous quarter, reaching $9.76 billion.

To attract more advertisers, Netflix is actively developing its live-streaming offerings, including sports events. In November, the company will broadcast a boxing match between Jake Paul and Mike Tyson, and in December, it plans to stream National Football League (NFL) games.

The release of the second season of the popular series “Squid Game” in December may also contribute to attracting new subscribers in the final quarter of the year.

Since the release of its second-quarter results in July, Netflix shares have risen 12.4%, significantly outperforming the S&P 500 index’s 5% growth.