The global fascination with artificial intelligence (AI) has emerged as one of the most compelling business trends in recent years. Companies at the forefront of AI advancements are part of an elite $1 trillion market cap club, including giants like Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Taiwan Semiconductor Manufacturing. These companies leverage AI to innovate and bolster their market positions. Apple integrates AI into its products like Siri and Maps, while Microsoft, Alphabet, Amazon, and Meta have created robust, AI-driven business models. Nvidia and Taiwan Semiconductor Manufacturing provide the hardware that powers AI technologies.
In the mix of these AI trailblazers, Netflix stands out as a pioneer in leveraging sophisticated algorithms for streaming recommendations and production decisions. Despite facing criticism for outdated content strategies, Netflix recently showcased its resilience by delivering another quarter of double-digit growth. Netflix's market cap is currently $324 billion, but its stock has surged over 100% in the past year and 1,380% over the past decade, indicating potential for further growth. Netflix's third-quarter results were a revelation, with revenue hitting $9.83 billion, a 15% increase year over year, and earnings per share soaring 45% to $5.40.
These figures were driven by a 14% growth in paid subscribers, with more than 5 million new members, surpassing analyst expectations. Revenue also benefited from an operating margin increase of 720 basis points to 29.6%. The company's forecast predicts continued momentum, with fourth-quarter revenue expected to reach $10.1 billion, a near 15% rise, and EPS projected to more than double to $4.23. On a recent earnings call, Netflix highlighted strategic growth opportunities, particularly its ventures into video gaming, live events, and advertising.
Games based on popular series like Squid Game are gaining traction. Live streaming events, such as a boxing match featuring Mike Tyson and Jake Paul and exclusive NFL games, are expanding Netflix's reach. Additionally, Netflix will host WWE Raw starting in January 2025, offering weekly wrestling entertainment. However, the most significant growth potential lies in Netflix's burgeoning digital advertising segment. The company has observed a faster growth rate in audience and ad inventory than anticipated, with 35% growth in lower-tier ad subscribers within a quarter.
Netflix is set to launch its ad server in Canada, expanding to other markets by 2025, and is deepening its collaboration with The Trade Desk to enhance advertising strategies. Initial data suggests ad-tier members' viewing habits are consistent with other subscribers, paving the way for projected doubling of ad revenue by 2025. Netflix's current market cap of $323 billion suggests it would need a 207% increase in stock value to reach $1 trillion. Analysts project Netflix will achieve $38.74 billion in revenue by 2024, maintaining an approximate P/S ratio of 8.
To hit the $1 trillion mark, Netflix needs annual revenue growth to about $357 billion. Current forecasts estimate a 26% annual revenue growth for the company over five years, potentially achieving the trillion-dollar goal by 2035. This target seems achievable, considering Netflix's decade-long 562% revenue growth and 1,450% jump in net income. Often surpassing Wall Street expectations, Netflix could accelerate this timeline. Presently priced at roughly 39 times earnings, Netflix's potential future EPS of $23.11 by 2025 aligns it with a valuation multiple resembling the S&P 500, suggesting a justified valuation given its historical performance and future growth prospects.
