The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers – far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

“We had a plan to reaccelerate growth and we delivered on that plan,” Netflix co-CEO Ted Sarandos said during a video call discussing the results.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

Netflix co-CEO Greg Peters predicted the company’s ad sales will double during the next year while remaining a just a sliver of total revenue that will continue to be propelled by subscription fees.

“We’ve got a lot of work ahead of us,” Peters said in a video call with investors. But he predicted Netflix’s foray into ads would eventually prove to be as successful as its recent crackdown on password sharing was.

Although he was impressed by most of Netflix’s report, Forrester Research analyst Mike Proulx called the slowdown in subscriber growth “concerning,” especially in the U.S., where the company is finding it increasingly difficult to attract more viewers.

“That’s why accelerating growth via advertising becomes paramount to Netflix’s go-forward strategy,” Proulx said.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

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SAN FRANCISCO (AP) — Netflix enjoyed its biggest springtime spurt in subscribers since the early days of the pandemic three years ago, providing the latest sign that a recent crackdown on password sharing and the rollout of a cheaper subscription option are paying off.

The video streaming service added 5.9 million subscribers during the April-June period, according to numbers released Wednesday along with its latest quarterly financial results. The gains easily surpassed the roughly 2.2 million additional subscribers that analysts surveyed by FactSet Research had anticipated. Netflix ended June with 238.4 million worldwide subscribers.

Investors seemed unsatisfied, perhaps rattled by management commentary in a shareholder letter warning that “quite a competitive battle” continues to unfold against the backdrop of ongoing strikes by both the writers and actors union in the U.S. that threaten to clog the pipelines feeding entertainment to streaming services. Netflix’s stock price fell 8% in Wednesday’s extended trading. The drop could also reflect some investors locking in profits that have accrued while the shares have climbed by more than 50% so far this year.

Money manager Louis Navellier said Netflix now appears “locked and loaded” again after going through a turbulent stretch that included losing 1.2 million subscribers during the first half of last year. Even though Netflix has bounced back this year, Investing.com analyst Jesse Cohen believes another slowdown may be coming. “It will be a challenge for Netflix to sustain this pace of subscriber growth in the future,” Cohen said.

Netflix predicted its subscriber growth during the July-September period will be similar to the numbers posted from April through June.

The second-quarter performance marked Netflix’s biggest spring —- traditionally the company’s slowest stretch of growth — since gaining 10 million subscribers during the same period in 2020 under dramatically different market conditions.

In 2020, people were still largely stuck at home and looking for ways to keep themselves entertained while governments around the world struggled to find a way to contain the spread of pandemic. Now, Netflix finds itself trying to bounce back from a growth slowdown amid stiff video streaming competition and inflationary pressures that have caused many households to clamp down on spending, especially on discretionary items such as entertainment.

As an antidote, Netflix last year introduced a low-priced option that includes commercials and then began to block the rampant sharing of passwords that has enabled an estimated 100 million people worldwide to watch its TV series and films for free. Freeloading viewers are now being required to open their own accounts unless a subscriber with a standard or premium plan agrees to pay an $8 monthly surcharge to allow more people living in different households to watch.

In its shareholder letter, management said the crackdown on password sharing is resulting in a “healthy conversion of borrower households into full paying Netflix memberships.”

And Netflix still isn’t done tinkering. As part of Wednesday’s earnings release, Netflix also revealed it’s phasing out its cheapest ad-free plan – a service that costs $10 in the U.S. Existing subscribers already paying for this basic plan will be allowed to keep it. The shift appears designed to get more people to switch to the $7 monthly plan that includes commercials in hopes of boosting ad revenue or sign up for its $15.50 monthly standard plan or $20 monthly premium plan.

“There is just tons of work ahead of us, tons of opportunity,” Netflix Co-CEO Greg Peters said during a Wednesday conference call.

The pricing changes that have already been made helped Netflix boost its second-quarter revenue by 3% from the same time last year to $8.2 billon, falling below analyst forecasts. Netflix earned $1.49 billion during the period, compared with $1.44 billion last year. But earnings per share came in at $3.29 per share, eclipsing the average analyst estimate of $2.85 per share, according to FactSet.

Netflix didn’t delve into the potential fallout from the current walkout in the U.S. by writers and actors. The dispute revolves largely around the payment system used in video streaming and the rise of artificial intelligence technology threatening to exploit the work of humans and eventually replace them.

Unlike traditional movie and TV studios in the U.S., Netflix has been able to keep feeding its entertainment pipeline with shows that it has been able to use to keep luring in and retaining subscribers.

Netflix co-CEO Ted Sarandos deflected a question about how long Netflix could keep releasing new series and films if the strike drags on past Labor Day. “It’s beside the point,” Sarandos said during the conference call. “The real point is we need to get this strike to a conclusion so we can continue to move forward.”

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The summer slump came as more people sought distraction from the pandemic outdoors and major U.S. professional sports resumed play, offering other entertainment alternatives to the world’s most popular video streaming service. The drop-off disclosed Tuesday in Netflix’s latest earnings report was more dramatic than management had warned it might be. After picking up 2.2 million customers in the July-September period, Netflix finished the quarter with 195.2 million worldwide subscribers.

Earlier, company had forecast an addition of 2.5 million subscribers during the quarter. Even so, Netflix is still ahead for the year. It has added 28 million subscribers through the first nine months of the year — locking in the company’s largest annual increase in its history.

But the momentum seems to be tapering off, based on the trends Netflix is seeing. The company is projecting a gain of 6 million subscribers in the October-December period, down from 8.8 million last year. Analysts were expecting Netflix to project a gain of 6.4 million subscribers for the final quarter of this year.

The influx of new subscribers has helped boost its stock by 59% so far this year. But shares of Netflix fell $28.53, or 5.4% to $496.89 in after-hours trading after the results came out. Wall Street generally still sees big things ahead for Netflix, which is based in Los Gatos, California, with its video streaming service poised to surpass 200 million subscribers soon. Even with the summer slowdown, Netflix’s popularity has spurred speculation whether the company may soon raise its U.S. monthly subscription prices by another dollar or two in the U.S., as it recently did in Canada earlier this month.

The company recently stopped offering free one-month trials in the U.S., a move some analysts viewed as a precursor to a potential price increase. Netflix’s most popular U.S. plan costs $13 per month. The company has periodically raised its prices to help pay for the original programming that has helped turn it into a cultural phenomenon in the face of intensifying competition from even bigger rivals such as Amazon and Apple.

Higher prices also help boost Netflix’s profit, which have remained relatively modest in light of its video service’s widening appeal. After a “blowout” first quarter and a strong second, it is “it is reasonable to think” Netflix would take a breather in new subscriber gains for the third, said Dan Morgan, a senior portfolio manager at Synovus Trust.

The company earned $790, million, or $1.74 per share, in the third quarter, up 19% from $665 million, or $1.47 per share, a year earlier. Revenue climbed 22.5% to $6.44 billion from $5.24 billion. Analysts were expecting earnings of $2.13 per share and revenue of $6.39 billion, according to a poll by FactSet.

Netflix said as the world “hopefully recovers” from COVID-19 in 2021, it expects its subscriber growth to revert back to pre-pandemic levels. That means growth will be much slower in the first half of next year than it was this year.

MICHAEL LIEDTKE and BARBARA ORTUTAY

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