Netflix (NFLX) reported a surge in third quarter subscriber numbers and announced it will be raising prices in the US, UK and France, sending its stock higher in after-hours trading Wednesday.
Beginning Wednesday, Netflix said its Basic and Premium plans will now cost $11.99 and $22.99, respectively, in the US. That’s up from the prior $9.99 and $19.99 price points. Netflix’s $6.99 ad-supported plan will stay the same price.
“Our starting price is extremely competitive with other streamers and at $6.99 per month in the US, for example, it’s much less than the average price of a single movie ticket,” the company said in its quarterly release. The last time Netflix raised prices was in March 2022.
Revenue slightly beat the company’s guidance of $8.52 billion as the streamer leans on revenue initiatives like its crackdown on password sharing, which rolled out in the US in late May, along with its ad-supported offering.
Netflix guided to fourth quarter revenue of $8.69 billion, slightly below consensus expectations of $8.76 billion.
Shares surged in after-hours trading as a result, up more than as 8%.
Here are Netflix’s third quarter results compared to Wall Street’s consensus estimates, as compiled by Bloomberg:
Revenue: $8.54 billion versus $8.53 billion expected
Adjusted earnings per share (EPS): $3.73 versus $3.49 expected
Subscribers: 8.8 million net additions versus 6.2 million net additions expected
Despite Netflix adding nearly 9 million new subscribers in the quarter, the company was unable to boost average revenue per membership, or ARM.
ARM decreased 1% year-over-year, in line with the company’s expectations. Netflix blamed the decline on a number of factors, “including a higher percentage of membership growth from lower ARM countries, limited price increases over the past 18 months, and some shift in plan mix.”
Profitability metrics like operating margin and free cash flow, however, steadily beat expectations.
Operating margin hit 22.4% in the quarter, surpassing Netflix’s own projection of 22.2%. The company said it expects full-year operating margins to hit 20% — the high end of its previous forecast between 18% to 20%.
Free cash flow impressed at $1.89 billion, above consensus calls of $1.27 billion. Netflix boosted its full-year free cash flow guidance to $6.5 billion, up from the prior $5 billion, amid the impact of the double Hollywood strikes.
On the advertising front, Netflix said the adoption of its ads plan continues to grow with membership up almost 70% quarter-over-quarter. The company said there’s still “more work to do to scale this business.”