Netflix is preparing to report its slowest subscriber growth in the past year and a half, as the boost from its password-sharing crackdown begins to taper off. After enforcing the crackdown in mid-2022, Netflix initially saw an increase in subscribers, adding 55 million paying customers. This brought its global subscriber base to nearly 278 million by June 2024.
Despite these gains, the momentum has slowed, leading Netflix to pivot its focus toward ad revenue. The company’s lower-priced ad-supported tier has seen a 34% rise in subscribers since March, but Netflix remains cautious about its potential. Chief Financial Officer Spencer Neumann noted that while ads will play a bigger role in Netflix’s business model, significant revenue growth isn’t expected until 2026.
In the second quarter of 2024, Netflix added 8 million subscribers, marking a 37% year-over-year increase. Profit soared 44% to $2.15 billion, exceeding analyst expectations. Revenue also rose by 17% to $9.56 billion. However, as subscriber growth decelerates, Netflix aims to focus on driving profits and boosting its ad-supported model.
Experts believe Netflix may raise prices and reduce ad-free options to encourage users to subscribe to the ad-supported plan. This could inevitably yield higher revenue per user. Investors are closely watching how Netflix leverages its advertising business for future growth.
In the third quarter of 2024, Netflix is expected to generate $242.7 million in ad revenue, with overall revenue projected to grow by 14.3% to $9.76 billion.
