NETFLIX REPORTS PROFITS EACH QUARTER, STORMS THE IDEA THAT GROWTH MAY BE SLOWING DOWN.

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Netflix announced second-quarter earnings that exceeded top-line revenue expectations, and posted wide-open profit margins, while its media network expands its international subscriber base, keeps adjusting subscription tiers to the upside, and continues scaling a lower-cost, ad-supported membership tier.

Second-quarter revenue was 13.4% higher than last year at $12.56 billion, and operating margins grew to 33.4% versus an internal target, but the two were also a little above and a little below consensus analyst estimates.

Thus, even though Netflix’s fourth-quarter revenue estimates are up 11.7% versus last year, “the streaming giant projects revenue for the third quarter of 2023 to be $12.86 billion, which represents a lower-than-expected year-over-year growth rate versus those high-quality quarters,” Reuters reported, accounting for its poor after-hours stock swing of 8% to 9%. Investors are worried that Netflix’s top-line expansion indicates that its gross margin has stopped growing.

While Netflix so-far hasn’t explained why long-term 800 million global households serviced by its network present massive monetization opportunities, the streaming giant expects that its advertising business will become a main contributor to its income from 2026 onward and also will publish an annual, rather than bi-annual, overview of its detailed viewing hours statistics starting in 2027.

✍️Ujjawal

Scholar from University of Delhi, INDIA