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Earnings Preview: Are Netflix users set to ramp up?

Netflix

The US big tech earnings will kick off with Netflix after the US markets close on 20 July (APAC time). Its earnings results will be a critical parameter for market sentiment after a strong bull run of tech stocks in the first half of the year. Subscriber change is the most important part of Netflix’s earnings report, as it is the key aspect gauging the company’s growth prospects.

Q1 review

In the first quarter, Netflix added 1.75 million new subscribers, in line with consensus but declining from 7.66 million the previous quarter. Netflix’s global users reached 232.5 million globally by the end of the first quarter. Earnings per share were $2.88, beating market expectations of $2.86, while revenue recorded at $8.16 billion, missing analyst estimates.

Business growing focus

For Netflix, its newly launched ad-supported tier and password-sharing crackdown policy are the focus of the upcoming earnings report, as the company believes the two strategies will help it accelerate users and boost profits. By May, the streamer had added 5 million active users in its ad-supported tier for the first six months after its launch in November 2022. The company has an ambition to grow 13 million new subscribers to the new program by the third quarter of 2023. The target looks like still within reach at the current pace. According to Netflix’s co-CEO Greg Peters, over 25 percent of new signups choose the ad-supported tier in countries where it is available.

The company has pushed back the broad rollout of its password-sharing crackdown in January. It officially commenced the policy in the US and globally in May, as cancellations saw in the countries where it already launched. The measure might cause a bump in user and revenue growth but will increase subscribers and income in the long haul, said Greg Peters.

Q2 earnings forecast by Bloomberg

Subscribers: 1.85 million 

Earnings per share: $2.90, - 9% annually

Revenue: $8.27 billion, + 3.8% annually

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