Netflix (NFLX) will report Q1 2022 earnings results tomorrow, here’s what to watch

Shares of Netflix Inc. (NASDAQ: NFLX) stayed in red territory on Monday. The stock has dropped 43% year to date and 38% in the past 12 months. The streaming giant is set to report its first quarter 2022 earnings results tomorrow after markets close. Here are a few points to look out for in the report:

Revenue and profitability

For the first quarter of 2022, Netflix has guided for revenues of $7.90 billion, which would reflect a year-over-year growth of 10.3%. The company reported revenues of $7.7 billion in the fourth quarter of 2021 and $7.1 billion in the first quarter of 2021. Analysts are projecting revenues of $7.93 billion.

One of the concerns about Netflix is the slowing growth rate of its revenue. Netflix benefited significantly from the pandemic as people stayed indoors and watched more content on streaming services thereby giving the company more subscribers and revenue. With the easing of the pandemic, this momentum is beginning to wane and this is being reflected in the numbers.

Revenues were up 24% in the first quarter of 2021. This slowed to 19% in the second quarter, 16.3% in the third quarter and then 16% in the fourth quarter. In Q1 2022, revenue is expected to grow 10.3%.

Looking at profits, Netflix expects to report earnings of $2.86 per share for Q1 2022. This compares to EPS of $3.75 in Q1 2021 and $1.33 in Q4 2021. Analysts are predicting earnings of $2.90 per share. Net income for Q1 2022 is expected to be $1.30 billion compared to $1.70 billion in Q1 2021 and $607 million in Q4 2021.

Subscriber base

One key metric that the Street will be watching is paid subscribers. Netflix estimates global streaming paid memberships to total 224.34 million in the first quarter of 2022, reflecting a YoY growth of 8%. As with revenue, the slowdown in subscriber growth is also a matter of concern. Paid memberships grew 13.6% in the first quarter of 2021. This was down to 9.4% in Q3 2021 and then 8.9% in Q4 2021.

Global streaming paid net additions are expected to be 2.5 million in the first quarter of 2022. This compares to 3.9 million paid net additions in the first quarter of 2021 and 8.3 million in the fourth quarter of 2021.

Content

Netflix has been investing significantly in original content to stay ahead of its competition. Last year the company had the biggest TV show of the year, Squid Game, and its two biggest film releases of all time, Red Notice and Don’t Look Up. Netflix had Bridgerton Season 2 and the movie The Adam Project release in March and it remains to be seen whether this has had any impact on engagement levels in Q1 2022.

Click here to read the full transcript of Netflix’s Q4 2021 earnings conference call