Three Key Questions About Netflix Inc. (NASDAQ: NFLX) Earnings in April 2023

Three Key Questions About Netflix Inc

Netflix Inc. (NASDAQ: NFLX) reported Q1 2023 results on Tuesday, April 18, 2023. What happened in Q1, what is the outlook for Q2, and what are the new questions to focus on?

Overall, Q1 was in line and Q2 guidance came in a bit below consensus. The stock initially traded down more than -10% in after-hours trading post-release, but then rebounded to around flat. As of the following trading day, the stock continued to be weighed down. The discussion in the earnings interview emphasized the paid sharing program and the potential for advertising.

1. Q1 consensus year-over-year revenue growth of 4% was in line with guidance and what the company delivered. Were there any surprises in Q1?

There were no significant revenue surprises in Q1. However, Netflix Q2 revenue guidance of $8.2B came in a bit below current consensus of $8.5B.

New question: Going forward, how will consensus revenue revisions trend for the second half?

2. Did the updates on the new paid sharing program in the Q1 release reveal anything new?

NFLX is going to push out the broader rollout of the paid sharing program to next quarter, which will push revenue and membership growth to Q3.

In the earnings interview, NFLX highlighted that they are significantly optimistic about advertising and that margins for this business look promising.

New question: How will analysts model this new business and what will be the range of estimates over the next few quarters?

3. Q1 consensus was expecting a 20% operating profit margin, in line with guidance. What is the outlook for operating profit margin going forward?

NFLX’s operating profit margin came in at 21% vs an expected 20%, but the company guided to a 19% operating profit margin, which was below consensus estimate of 20.7% for Q2. The full-year operating profit margin outlook of 18-20% remains in line with the consensus estimate of 19.2%.

New question: How will the additional advertising revenues impact margins going forward?



About Melissa Otto

Melissa spent 20+ years as an equity analyst and portfolio manager. She specialized in covering global technology and consumer stocks and the Pan-Asia region at TIAA/Nuveen. She also managed one of Fidelity's equity research teams as a director of research. In addition to her equity investing career, Melissa worked directly with software engineering teams at Bloomberg, Microsoft, and MSCI building cloud-based solutions to centralize and aggregate critical investment data for investors. Melissa studied Japanese at Harvard University, received her MA in economics from Brandeis University and MS degree from the University of Pennsylvania, and is a CFA charter holder. She is certified in Azure Fundamentals and Agile Project Management.