Shares of Netflix, Inc. (NASDAQ: NFLX) were down on Tuesday. The stock has gained 48% year-to-date and 29% over the past three months. The streaming giant is scheduled to report its second quarter 2023 earnings results on Wednesday, July 19, after market close. Here’s a look at what to expect from the earnings report:
Revenue
Netflix has guided for revenue of $8.24 billion for the second quarter of 2023, which would represent a growth of 3.4% from the same period a year ago. Analysts are projecting revenue of $8.27 billion, which reflects a year-over-year growth of 3.8%. In Q1 2023, revenues grew 3.7% YoY to $8.16 billion.
Earnings
Netflix has guided for net income of $1.28 billion, or $2.84 per share, for Q2 2023. Analysts are also expecting EPS of $2.84. In Q1 2023, the company reported net income of $1.30 billion, or $2.88 per share.
The streaming company expects operating income to total $1.56 billion and operating margin to be 19% in Q2 2023. This compares to $1.57 billion and 19.8% respectively in Q2 2022. In Q1 2023, operating income was $1.71 billion and operating margin was 21%.
Points to note
Netflix expects revenue to grow 6% YoY on an FX-neutral basis in Q2. The majority of this growth is expected to come from an increase in its paid membership base. The company expects paid net additions in the second quarter to be roughly similar to the first quarter of 2023. It also expects average revenue per membership (ARM) to see a slight increase YoY on an FX-neutral basis.
Netflix had previously planned to roll out its paid sharing initiative more broadly in Q1 but had pushed this plan to Q2 in order to make room for some improvements. Further details on the progress of this initiative are worth noting. Due to this shift, some of the benefits from membership growth and revenue will be pushed to the third quarter of 2023.
The company has been seeing better-than-expected engagement on its ads-based tier with very little switching between plans. In Q1, within the US, the total ARM from the ads plan was greater than the standard plan. More details on the performance of this tier is worth watching.