But the stock is slated to sell off on Friday after the world’s most valuable entertainment company shocked the market with news it would soon cease updating investors every quarter on how many customers subscribe to the streaming giant.

“Ultimately we think this is a better approach that reflects the evolution of the business,” co-CEO Greg Peters said on Thursday, adding the decision was “consistent with how we manage internally to engagement, revenue, and profit.” 

Investors fear it may be linked to last year’s password-sharing crackdown, which—together with its push into a new advertising-supported subscriber tier—has driven its remarkable growth of late. 

Since the initiative began to affect results in the latter half of 2023, that means year-on-year comparisons will soon switch from tailwinds to headwinds. The bulk of the low-hanging fruit has already been harvested, leaving only a few quarters of increasingly diminishing returns.

It is possible Netflix expects U.S. subscriptions could start to decline next year, something it first saw back in 2019 before the pandemic supercharged demand. Markets didn’t digest the news well at the time, and shares are now set to open 5% lower when trading begins later today.

“What is really spooking the Street right now,” Bloomberg Intelligence senior media analyst Geetha Ranganathan told Yahoo Finance, “is that they are going to stop issuing any type of subscriber metric starting from the first quarter of 2025, and I think people generally view that as growth kind of plateauing.”

Netflix only testing the waters in live sports

The industry is currently going through a shakeout as both linear and digital TV have their own specific sets of problems. Paramount is looking to sell itself, while Disney evaluates which assets it should offload to fund its loss-making streaming service and, with it, eventually earn double-digit margins in future. 

Netflix, however, has already long since reached the promised land. On the back of subscriber numbers that exceeded Street estimates by roughly 5 million and a 25% operating margin target for 2024, Deutsche Bank hiked its estimates for revenue, operating profit, and free cash flow—and with it the price target on the stock to $575, up from a previous $550. 

Going forward, however, investors are asking themselves what will drive earnings growth once the effects from the crackdown on password sharing and expansion into ad-supported subscriptions begins to peter out. 

One solution has been pivoting to live sports, an area long dominated by Disney’s ESPN and that comes with the kind of built-in audiences attractive to advertisers. 

With the help of its deep-pocketed parent, Amazon, Prime Video struck first in 2021, inking a deal to show Thursday night NFL games for a reported $1 billion per year. 

By comparison, Netflix has only begun dipping in its toes to test the waters, signing a deal to show the Mike Tyson bout with Jake Paul as well as bring wrestling matches from WWE Raw to the platform come next year. 

Investor Deepwater Asset Management argued this won’t be nearly enough, however, and warned that the kind of heavy spending Netflix will need to secure streaming rights will almost certainly dilute its profitability.

“If it’s kind of these one-off sporting events—or eclectic sporting events like wrestling, NASCAR, things like that—I don’t think that’s going to move the needle,” Gene Munster, managing partner at Deepwater, told CNBC. “They got to get into some mainstream sports, and that’s going to be an impact on margins.”