What to expect when Netflix (NFLX) reports Q4 earnings this week

Shares of Netflix Inc. (NASDAQ: NFLX) were down over 1% on Tuesday. The stock has gained 33% over the past three months. The streaming giant is scheduled to report its fourth quarter 2022 earnings results on Thursday, January 19, after market close. Here’s a look at what to expect from the earnings report:

Revenue and profits

For the fourth quarter of 2022, Netflix has guided for $7.8 billion in revenue which represents a year-over-year increase of just around 1%. On a constant currency basis, revenue growth is expected to be 9% YoY. The top line estimate represents a 2% decline sequentially. Analysts are projecting revenue of $7.8 billion as well.

For Q4 2022, Netflix has guided for net income of $163 million and EPS of $0.36 which compares to $607 million and $1.33 respectively in the same period last year. In Q3 2022, the company reported net income of $1.3 billion and EPS of $3.10. Analysts are predicting EPS of $0.44 for Q4 2022.

Subscriber growth

This is a keenly watched metric in Netflix’s earnings report. 2022 did not start off well for Netflix in terms of subscriber growth. After shocking and disturbing investors with two consecutive quarters of subscriber losses, the company bounced back in Q3 2022 with net additions of 2.41 million.

For the fourth quarter of 2022, Netflix has forecasted paid net additions to be 4.50 million. This compares to 8.28 million reported in the year-ago quarter. Global streaming paid memberships are estimated to be 227.59 million in Q4, representing a YoY growth of 2.6% and a sequential increase of 2%.

In its Q3 earnings report, Netflix stated that from the fourth quarter onwards, it would not be providing guidance for paid membership as it plans to focus on revenue as its primary top line metric.

Ad-supported plans and account sharing

In November, Netflix rolled out its ad-supported subscription plan in 12 markets including the US, UK and Canada. The plan, called Basic with Ads, starts at $6.99 per month in the US with around 5 minutes of advertising per hour.

The company is also working on monetizing account sharing and from this year, it plans to offer users various options such as transferring profiles and creating sub-accounts to pay for family and friends. The response to the ad-supported tier and its impact, if any, on subscribers as well as updates on the account sharing initiatives are worth keeping an eye on.

Also read: Here’s one thing that could always give Disney (DIS) an edge over Netflix (NFLX)