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Netflix shares edged higher in early Tuesday trading as investors looked to the streaming media group's fourth quarter earnings, and a likely boost from live sports and ad sales to its bottom line, after the close of trading.
Netflix, which last year recorded its strongest annual share gain since 2015 with an 85% increase, saw a late-December pullback tied in part to the likely impact of a stronger U.S. dollar on its near-term profit outlook.
The group generated more than half its $9.83 billion of third quarter revenue from non-U.S. markets, and a firmer dollar makes those sales less valuable when they return home and are converted into profit.
The U.S. dollar index, which tracks the greenback against a basket of its major currency peers, has risen nearly 8% since Netflix calibrated its 2025 revenue outlook of between $43 billion and $44 billion, and further gains are expected under the trade and tariff polices of President Donald Trump and a higher-for-longer inflation forecast from the Federal Reserve.
That's likely to weigh on profit into next year and could cloud the impact of a solid fourth quarter, which analysts expect included 9.2 million new subscribers and record quarterly revenue of $10.11 billion.
Live-sports boost expected in Netflix Q4 report
Netflix, which introduced an ad-based streaming tier in November 2022, is expected to have generated around $528 million in sales from the platform in the fourth quarter. Revenue is likely to pass the $2 billion mark by the end of 2025, analysts say.
Live sports has been a key component of the ad-based growth. Some 60 million viewers entered the platform to watch the Jake Paul/Mike Tyson boxing match in November and around 26.5 million joined the Christmas Day National Football League matchup between the Kansas City Chiefs and the Pittsburgh Steelers.
Related: Netflix betting millions on genius new content
"Netflix started small with originals and scaled up investment as it saw subscriber interest," said KeyBanc Capital Markets analyst Justin Patterson, who carries a $1,000 price target and overweight rating on the stock.
"With Netflix subscribers clearly interested in live content, we are curious to see which other events can be acquired at reasonable prices."
What investors won't hear, however, is any direct commentary on subscriber growth, as Netflix will no longer publish forecasts based on net additions under its new reporting structure.
Ad sales are key to Netflix's growth
That said, Wall Street estimates December-quarter additions of 9.2 million, an 80% increase from the prior period but a 32% decline from the year-earlier quarter.