Netflix reported Thursday that its subscriber growth slowed dramatically over the summer, a sign that huge gains from the video streaming service’s crackdown on freeload viewers are waning.

The 5.1 million subscribers Netflix added in the July-September period represented a 42% decline from total gains in the same period last year. Still, the company’s sales and profits grew faster than analysts had predicted, according to FactSet Research.

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

The Los Gatos, California-based company earned $2.36 billion, or $5.40 per share, up 41% from the same period last year. Sales rose 15% year over year to $9.82 billion. Netflix management forecast that the company’s October-December revenue would rise 15% year over year, slightly better than analysts expected.

Last quarter’s strong financial performance, coupled with optimistic guidance, overcame any concerns about slowing subscriber growth. Netflix’s share price rose nearly 4% in extended trading after the earnings release, building on a more than 40% rise in the company’s shares this year.

Subscriber gains last quarter were the lowest in a three-month period since the start of last year. This decline suggests that Netflix is ​​moving into a new phase after benefiting from a ban on the once-widespread practice of sharing account passwords, which allowed an estimated 100 million people to watch its popular service without paying.

The crackdown, sparked by a rare loss of subscribers due to the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 to June of this year – an average of more than 7 million per quarter, while many of its industry rivals Problems occurred as households restricted their discretionary spending.

Netflix’s gains were also boosted by a low-cost version of its service that included commercials for the first time in its history. The company still gets only a small portion of its revenue from its two-year-old advertising push, but Netflix is ​​increasing its focus on this business segment to boost its profits.

In a letter to shareholders, Netflix reiterated previous warnings about its expansion into advertising, even as the low-cost option, including commercials, has become its fastest-growing segment.

“We still have much work to do to improve our offering to advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

The story continues

As Netflix has evolved, it has increasingly supplemented its slate of scripted TV series and films with live programming, such as a Labor Day extravaganza starring famed glutton Joey Chestnut, who sets a world record for eating hot dogs in a showdown with his longtime nemesis sets up Takeru Kobayashi.

Netflix will try to attract more viewers in the current quarter, with a fight on November 15 pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day arrives.