Price increases: Netflix achieves record profits

Netflix subscriptions are becoming increasingly expensive. Recent price increases helped the streaming service continue its rapid revenue growth in the second quarter. In its quarterly report released after the market closed on Thursday, the company also reported record profits. The figures were slightly above expectations overall, and Netflix slightly raised its full-year revenue forecast.

However, enthusiasm on the stock market was limited. The share price initially fell slightly in after-hours trading. However, Netflix has recently performed brilliantly on the stock market, nearly doubling its share price in the past twelve months. With a market capitalization of more than $ 540 billion, Netflix is by far the most valuable company in the entertainment industry today. Disney's current value is around $220 billion.

Analyst Paul Verna of the market research group Emarketer called Netflix's numbers "robust," adding: "Netflix continues its multi-quarter winning streak and cements its place as the market leader among streaming services."

Overall, Netflix reported revenue growth of 16 percent to $11.1 billion for the second quarter, slightly above its own forecast and those of analysts. The company attributed the growth to user growth, higher subscription prices, and an expansion of its advertising business, as well as a positive currency effect.

Netflix announced price increases for its US home market and several other countries in January. For example, the price of the standard subscription rose from $15.49 to $17.99, and the subscription with ads now costs $7.99 instead of $6.99. Germany was not affected by this round of price increases; prices there were last increased in April 2024, although the budget subscription with ads was spared. Netflix said the effect of the recent price increases on cancellations and other metrics was in line with expectations.

According to Netflix, the total number of subscribers increased more significantly than expected in the second quarter, with the strongest increases occurring toward the end of the quarter. Unlike in the past, the company has stopped regularly publishing specific subscriber numbers this year. At the end of 2024, it had nearly 302 million paying customers.

The advertising business is still relatively new for the streaming service. However, it hopes to expand quickly and aims to roughly double advertising revenue this year. The company hasn't provided specific figures. Emarketer expects Netflix to earn around $2 billion from advertising in the US alone in 2024. The Wall Street Journal recently reported that in an internal presentation, Netflix set the goal of increasing advertising revenue to $1 billion by 2030. Total revenue should then reach $80 billion, more than double what it was in 2024.

For the second quarter, Netflix reported a net profit of $3.1 billion. This was the highest ever and 46 percent higher than the previous year. This makes Netflix above-average profitable compared to the industry. Many competing streaming services are still loss-making or generating modest profits. Disney has only recently reported an operating profit in its streaming division; in its most recent fiscal quarter, it was $336 million.

For the full year, Netflix expects revenue of $44.8 billion to $45.2 billion, compared to a previous forecast of $43.5 billion to $44.5 billion. Netflix says the range of new content will be significantly stronger in the second half of the year than in the first. Among other things, the final season of the series "Stranger Things" is scheduled to be released. Beyond television series and films, Netflix is also increasingly focusing on live content. This includes boxing matches and NFL games. These live productions have so far been largely limited to the American market. However, co-CEO Ted Sarandos said in a conference call that Netflix intends to focus more on other countries in the future.

Netflix has so far been largely unaffected by concerns about an economic slowdown. "Everything looks stable," said Co-CEO Greg Peters, looking at the key metrics. The entertainment industry is "fairly resilient" even in challenging economic times, he said. And Netflix still offers good value despite the recent price increases.