As with most Netflix earnings reports, the question the company will ask Tuesday is not whether or not the number of subscribers will rise, but just how high the number can get.
Most Wall Street analysts expect a notable rise in the fourth quarter, which ended on December 31, driven by the fight between Jake Paul and Mike Tyson, two NFL fights and the premiere of series such as… Squid gameSeason two.
Netflix's report, which comes on the first full day of President Donald Trump's second term, will kick off a five-week period of new financial results for the media and technology industry. The numbers and executive comments, coming after the annual holiday lull, will provide the first indications about the trajectory of 2025.
Disney and Warner Bros. are expected to… Discovery and Fox Corp. will weigh in on the failed streaming joint venture, Venu Sports, and Comcast, will update Wall Street on the progress of the NBCUniversal cable network bid it announced last November, and Paramount Global will provide updates on the company's pending merger with Skydance Media. Leaders of major technology companies will also make their voices heard after flocking to Washington for Trump's inauguration.
Netflix is expected to add 8.2 million subscribers this quarter, to 290.9 million, according to Wall Street analysts' forecasts. Given the company's high momentum at the end of December, estimates are subject to an upward revision. A survey of 45 buy-side analysts by Guggenheim Securities found that 70% are calling for at least 11.1 million net additions this quarter, and 29% are now north of 13.1 million. This is the last quarter in which the streaming company plans to report subscriber numbers, shifting its focus to revenue and operating margin, along with audience metrics like engagement.
Macquarie's Tim Nolen believes the timing of the end of the joint reveal is not accidental. “It is possible that subscription growth will slow from here as paid engagement is largely implemented, but a slowing sub-growth rate does not necessarily mean slower growth for the company overall,” he wrote in a note to clients.
Nolen sees the company adding more than 10 million subscribers this quarter, with a “good chance” the number will end up higher than that, which is one reason he raised his 12-month price target for Netflix shares to $965, from $795.
Alicia Reese of Wedbush Securities sees the two-year-old company's advertising business becoming a major revenue driver by 2026. In a recent research note, she maintained an “outperform” rating on Netflix shares at a 12-month target of $950. “Netflix has made an almost insurmountable lead in the streaming wars,” she wrote. “Netflix can maintain its moat while competitors try to replicate its business model. …With world-class content created, costs balanced, and profitability increased, Netflix has hit on the right formula.
Among the questions Netflix wants to address during its self-moderated earnings call (where the head of investor relations selects and collects analyst queries rather than an open conference call format) are related to price hikes, advertising growth and live sports strategy. The streaming company announced just before Christmas that it had acquired the rights to multiple editions of the FIFA Women's World Cup, adding to a multi-year NFL relationship that was set to launch in 2024. WWE Raw It also began weekly streaming earlier this month under a multi-year rights deal, adding strong traction to the advertising tier, which is where Netflix is focusing its energy.
Disney is implementing a similar streaming strategy. With its portfolio finally profitable five years after the groundbreaking launch of Disney+, the company is pushing more customers toward the cheaper, ad-supported option. It also mimics Netflix's efforts to force anyone who shares passwords to pay for the privilege.
Like its media peers, Disney faces a number of other challenges. The Los Angeles wildfires, which started the year disastrously, especially for many in the entertainment industry, will factor into the company's earnings report despite breaking out after the end of the quarter. In a recent note to clients that reaffirmed her “buy” rating on Disney but raised some concerns, BofA Securities analyst Jessica Reeve Ehrlich wrote that “the recent Los Angeles fires do not appear to have had a material impact on Disneyland attendance.” However, it sees a “potential risk” to the forecast of additional costs due to the need for temporary staff accommodation and business disruption.
Ehrlich expects that the quarter ending in 2024, officially the first quarter of Disney's fiscal year, which began last fall, “will be the bottom quarter of this fiscal year” for the company's experiences division. The impact of the two recent hurricanes, along with pre-opening cruise ship costs, will impact results.
Then there's Venu, which was canceled before launch. It was announced with great fanfare in February 2024 by JV partners Disney, Fox and WBD, and was sued on antitrust grounds by pay-TV provider Fubo. As part of the settlement reached this month, Disney said it would acquire 70% of Fubo.
The three partners will likely be asked to determine the size of their investments in Fino. During the trial, it was revealed that the tab had crossed $50 million as the streaming offering was designed and operated by over 100 employees. The closure costs are likely to add millions more at an inopportune time given the austerity policy and cuts extending across the traditional media sector.
With a mixed bag that includes better results at the movie studio but disappointing NBA ratings and expenses for things like password sharing and other streaming initiatives, Ehrlich sees “a lot of moving parts” and “unknowns” at play at Disney.
Meanwhile, executives at big tech companies at Amazon, Apple, Alphabet and Meta typically keep their strategy cards close to their vests while reporting earnings. This time, they will be speaking to investors shortly after their meeting together in Washington, D.C., where they will lend their support to President-elect Trump along with big tech figures like Elon Musk and Marc Andreessen, and the companies hope to be rewarded for their loyalty.
Trump's first term was marked by combative and acrimonious relationships with corporations, many of which eventually banned him from using their platforms. President Biden's administration has seen a number of regulatory measures aimed at curbing corporate power.
Despite Biden's warning about “the few” trying to influence American democracy, a common priority has crystallized among tech companies and government officials: making money through innovation. This is a political message that Wall Street can always support.
