Netflix reported solid Q3 2024 results, with a 15% increase in revenue year-over-year, reaching $9.825 billion. However, the company’s net paid subscriber growth slowed to 5.1 million new subscribers in Q3 2024, compared to 8.8 million additions in Q3 2023. In Q2 2024, Netflix added 5.9 million net new paid subscribers globally, which shows a continued deceleration in subscriber growth through the second half of the year.

Despite this slower pace, Netflix remains optimistic about future growth, driven by its expanding content slate and the increasing popularity of its ad-supported tier.

The company’s total global paid subscribers reached 282.72 million by the end of Q3 2024, a 14.4% increase from last year. While this marks a positive trajectory, it represents a modest deceleration in subscription growth compared to previous quarters. For example, in Q3 2023, Netflix saw a 16.0% year-over-year increase in subscriptions. This slower growth comes as Netflix navigates market saturation in more mature regions like North America and pricing changes in markets like Latin America.

Subscription Revenue vs. Growth Pace

In terms of revenue, Netflix’s subscription model remains robust, contributing to the overall 15% year-over-year revenue growth. Although the number of new subscribers has slowed, the company’s average revenue per membership (ARM) held steady, which helped maintain financial momentum. This balance of stable ARM and strategic price increases in select regions helped offset the effects of slower membership additions.

• For example, in North America (UCAN), Netflix’s most mature market, subscriber growth has slowed to just 0.69 million net additions in Q3 2024, compared to 1.75 million in the same period last year. However, the region still saw a 16% revenue increase, driven by both price increases and steady ARM improvements. 

• Similarly, while Latin America saw a slight decline in net additions due to recent price adjustments, revenue from the region grew by 9% year-over-year, indicating resilience in subscriber value despite softer content performance in Q3.

• Conversely, the Asia-Pacific (APAC) region posted the strongest results, with 2.28 million new subscribers and a 19% revenue increase, demonstrating the potential for future growth in less saturated markets.

Ad-Supported Tier as a Growth Catalyst

Netflix’s ad-supported subscription plan continues to be a bright spot in the company’s growth strategy. The ad-supported tier grew by 35% quarter-over-quarter, and in markets where it is available, more than **50% of new sign-ups** opted for the ad-tier plan. This lower-priced option is designed to capture price-sensitive subscribers, which is key in regions with lower household incomes. While the ads business is still in its infancy, Netflix expects it to play a more substantial role in revenue generation by 2025.

In the Q3 earnings call, Co-CEO Greg Peters highlighted the company’s priority of building scale in its ad-supported markets, with an eye on increasing the inventory and monetization of ads over the coming years. Netflix believes that this tier will continue to grow and become a significant revenue driver as it gains more market share and advertisers flock to its platform.

Content and International Expansion Fuel Growth

Despite the deceleration in subscription growth, Netflix’s content strategy remains a core component of its success. The company’s diverse content slate, spanning multiple countries and languages, continues to drive global engagement. Ted Sarandos, Co-CEO, highlighted the strength of Netflix’s international content, which includes hit shows like *The Perfect Couple* and *Tokyo Swindlers*, and upcoming releases like *Squid Game* Season 2. These programs appeal to audiences across the globe, helping Netflix maintain a competitive edge in international markets.

Netflix’s focus on expanding into new markets, particularly in APAC and EMEA, has contributed significantly to its overall subscription growth. As more countries adopt the platform and local content production ramps up, Netflix expects these regions to play a critical role in its long-term growth strategy.

Looking Forward: 2025 and Beyond

Looking ahead, Netflix forecasts 11%-13% revenue growth for 2025, driven primarily by new subscriber additions and ARM increases. The company also expects continued growth from its ad-supported tier, which will become more critical to its overall business model. CFO Spencer Neumann projected that ad revenues would double in 2025, albeit from a small base, setting the foundation for longer-term monetization through advertising.

While subscription growth is expected to remain slower in more mature markets, Netflix is positioning itself for sustainable growth through new content, innovative pricing strategies, and ad-tier expansion.

INSIDER TAKE

Netflix’s slower subscription growth in Q3 reflects the challenges of market saturation in mature regions like North America, but the company’s focus on content diversity and strategic price increases has allowed it to maintain healthy revenue growth. The expansion of the ad-supported tier is a critical part of Netflix’s strategy, as it appeals to price-sensitive consumers and offers new revenue streams through advertising. Looking forward, Netflix’s ability to balance subscription growth with new monetization opportunities will be key to its continued success. While growth may be slower, Netflix is betting on its global content strategy and new initiatives to drive future revenue.