Netflix (NFLX) Q3 2023 earnings
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LOS ANGELES – Netflix Stocks rose after the closing bell on Wednesday as the The company reported an increase in subscriber growth driven by crackdowns on password sharing and interest in the new ad-supported tier.
Street Account estimates the streaming giant added 8.76 million subscribers worldwide during the quarter, more than 5.49 million Wall Street expected. It’s the highest quarterly net gain for the company since it added 10.1 million subscribers in the second quarter of 2020 – when people stayed at home due to coronavirus restrictions.
Here are the results:
- Merits: According to LSEG, formerly known as Refinitiv, it expects $3.73 versus $3.49 per share
- Revenue: $8.54 billion versus $8.54 billion expected, according to LSEG
- Expected Total Memberships: 247.15 million versus 243.88 million expected, according to Street Account
Netflix said its advertising plan membership increased nearly 70% compared to the previous quarter, but did not disclose what percentage of its customer base subscribed to this tier.
The results were the latest confirmation that Netflix is dominating the streaming world while its would-be competitors are working hard to become profitable.
The company’s dominance is reflected in its pricing power. Netflix said it is keeping its ad tier prices in the US at $6.99 per month, while raising prices for its basic and premium services starting Wednesday. Netflix’s basic plan is now $11.99 (was $9.99) and its premium plan is $22.99 per month (was $19.99). Netflix’s standard plan remains at $15.49 per month.
The price increases come as the company seeks to improve its profitability and contends with higher production costs.
As part of its new deal with Hollywood writers, Netflix, along with other members of the Alliance of Motion Picture and Television Producers, agreed to higher wages and financial benefits based on streaming popularity. The AMPTP has not yet completed negotiations with striking actors, but content creation costs are expected to rise if a new contract is reached.
“The last six months have been challenging for our industry given the combined writer and actor strikes in the U.S.,” Netflix said in its report Results publication Wednesday. “While we have reached an agreement with the WGA, negotiations with SAG-AFTRA are ongoing. We are committed to resolving the remaining issues as quickly as possible so that everyone can get back to work and produce films and television shows that audiences will love.”
The company forecast fourth-quarter revenue would rise 11% to $8.69 billion, below Wall Street expectations of $8.77 billion. Netflix said it expects net new customer additions to be similar to the third quarter.
It warned that the strength of the US dollar in recent months will cause fourth-quarter sales to fall by around $200 million.
As for Netflix’s profitability, the streamer now expects its full-year 2023 operating margin to be around 20%, which is the high end of its previous guidance range of 18% to 20%. For the full year 2024, the operating margins are likely to be between 22 and 23 percent.
The company too addressed the concerns of shareholders about its executive compensation model and told investors it would make “significant changes” to a more conventional model in 2024. Remuneration continues to be performance-based.
Co-CEO Ted Sarandos and former co-CEO Reed Hastings each took home their luck more than $50 million in 2022. Hastings put most of his income into stock options, while Sarandos opted for a base salary of $20 million and the rest in stocks.
After Greg Peters was named co-CEO and Hastings resigned, the company set a $3 million executive salary cap. However, you are still entitled to an annual target bonus and additional stock awards.
