Netflix (NFLX) Q3 Earnings Beat Market Expectations

Summary:

• Netflix shares increased 14%.
• Netflix also plans to take action against password sharing.

Netflix Q3 Earnings summary

Following the company's announcement that it had surpassed Wall Street's expectations by adding 2.41 million members during the third quarter, shares increased 10%. According to Netflix officials, "despite a hard first half, we feel we're on a road to reaccelerate growth," with "satisfying members" being the key. Netflix identified the strong dollar as a challenge and projects that the rise of the dollar will reduce income for the entire year 2022 by up to $1 billion.

Santosh Rao, Head of Research at Manhattan Venture Partners, said in an interview with Yahoo Finance that Netflix's robust subscriber growth figures show "everything is working" and that the company is now releasing the ad-supported tier from a "point of strength."

“Thank God we’re done with shrinking quarters,” said Reed Hastings, chief executive, during a video call with investors. “We’re back to the positivity.”

After the New York stock exchanges opened on Wednesday, shares of Netflix increased by more than 15%.

The industry pioneer in video streaming reported a modest fall in net income, from $1.44 billion a year ago to $1.4 billion, shocking investors with its announcement in April that it had lost customers. Earnings per share decreased 2.8% to $3.10, beating Wall Street's forecast of $2.10 per share.

Additionally, it issued a warning that the impact of the strong currency and macroeconomic headwinds like inflation would result in a decline in revenue and earnings in the fourth quarter. Hastings stated that the fourth-quarter forecast was reasonable, but not fantastic”, adding: “We’ve got to pick up the momentum.”

In response to mature subscriber growth in key areas, the company has introduced two steps to maintain its business: a less expensive streaming service financed by advertising and an effort to prevent rampant password sharing.

Early in 2019, Netflix also plans to take action against password sharing, a problem it had largely disregarded while seeing explosive subscriber growth. The business will give account holders the option to set up "subaccounts" for close relatives or friends who use one account as a base.

✕ NFLX Price Chart

Sources: ft.com, finance.yahoo.com