Netflix first quarter earnings preview: Subscriber growth in focus

Netflix is focusing on revenue growth as its primary metric for growth assessment
Netflix is focusing on revenue growth as its primary metric for growth assessment Copyright Matt Rourke/Copyright 2017 The AP. All rights reserved.
Copyright Matt Rourke/Copyright 2017 The AP. All rights reserved.
By Tina Teng
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The earnings season for major US tech companies is set to commence with Netflix on 18 April. While Netflix has stopped offering guidance on its subscriber growth, the addition of users remains a pivotal metric for its earnings report.


Following a mixed bag of the US banking earnings outcomes, Netflix will take the spotlight as the initial major US tech company to report its first-quarter performance after the US market on 18 April. With Netflix shares showing a 28% increase year-to-date, outperforming the majority of prominent technology stocks in 2024, anticipation is high. As the world's largest video streaming platform, the number of subscribers remains a pivotal metric, offering insights into the company's growth trajectory.

Netflix's subscriber hit a record high in Q4 FY23

In 2023, Netflix experienced a notable resurgence in growth following a significant slowdown in 2022. This turnaround is largely credited to the introduction of its ad-tier plan in November 2022. Additionally, the company's crackdown on password-sharing has also played a significant role in driving its subscriber growth. In the last quarter of 2023, the video-streaming service company added 13.1 million users, taking its total subscribers to a record 260.8 million, up by 12% from 2022. This surge in user growth has solidified Netflix's position as the market leader in the streaming service industry, followed by Disney+ and Amazon Prime.

WWE's weekly television show "Raw" is moving to Netflix as part of a major streaming deal
WWE's weekly television show "Raw" is moving to Netflix as part of a major streaming dealCharles Krupa/Copyright 2023 The AP. All rights reserved.

Netflix has beaten the market estimates in revenue growth for two out of the past four quarters. In the final quarter of 2023, its revenue grew by 8.2% to $8.83 billion (€7.1 billion), with the net income increasing to $937.8 million (€753.6 million), translating to an earnings per share of $2.11 (€1.69), a substantial increase from $0.12 in the same quarter of 2022.

Netflix has forecasted an increase in earnings per share to $4.49 (€3.61) and a rise in revenue to $9.2 billion (€7.4 billion) for the first quarter of 2024. This represents a 56% and 13% increase, respectively, from the same period a year ago. Furthermore, the company anticipates enhancing its operating margin to 24% for the full year of 2024, up from 21% in 2023.

Netflix has refrained from offering guidance for its subscriber numbers, instead focusing on revenue growth as its primary metric for growth assessment. Analysts, however, anticipate the addition of 4.88 million subscribers in the first quarter, nearly tripled from 1.75 million in the same period last year.

Netflix's ambition in the WWE programming

In January, the streamer reached an agreement with TKO Group Holdings to broadcast the WWE's flagship programme "Raw" starting in 2025. The partnership is seen as a spotlight for its growth, which is a big step for the company to expand into the realm of live-streaming entertainment. 

According to Netflix's statement, the 10-year partnership will enable the streamer to air Raw exclusively in the US, Canada, UK, and Latin America beginning in January 2025. TKO Group Holdings is the company that owns the renowned mixed martial arts organisation, UFC. And WWE is part of the group, and is an "integrated media organisation and the recognised global leader in sports entertainment".

In the upcoming earnings report, Netflix is expected to unveil further details regarding the deal and offer guidance on the potential growth stemming from its inaugural foray into live sports offerings. Hence, positive earnings results and optimistic forecasts for the new programme could potentially propel the company's share price even higher. Conversely, if the earnings report falls short of expectations, it could disrupt the upward trajectory of its stocks.

Netflix confronts a souring market sentiment

Netflix's earnings result encounters a downbeat market sentiment at this time as Wall Street retreated from all-time highs in the past few weeks. 

The technology sector, in particular, lost steam amid a surge in the US bond yields following the release of hotter-than-expected inflation data for March. Historically, investors have tended to penalise positive earnings results in times of souring market sentiment, adding uncertainties to the outlook for big tech earnings. Hence, Netflix's result will be critical for the broad market in guiding the tech company's growth trajectory.

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