Netflix Has ‘Monster’ Q3 With 2.4 Million New Subscribers, Forecast Beat, And Profits

Media Netflix Has ‘Monster’ Q3 With 2. 4 Million New Subscribers, Forecast Beat, And Profits David Bloom Senior Contributor Opinions expressed by Forbes Contributors are their own. I’m a media/tech/entertainment writer, podcaster, speaker and analyst Following New! Follow this author to stay notified about their latest stories.

Got it! Oct 18, 2022, 05:35pm EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin (Image courtesy of NETFLIX) After half a year in misery that forced dramatic changes across the company and the entire streaming industry, Netflix bounced back in its third quarter earnings in a big way, topping forecasts, adding 2. 4 million subscribers and even making money. The company released results and an investor letter after markets closed Tuesday that also marked a return to the company’s traditional swagger, as it tweaked competitors for losing money, bragged about a string of big hits led by Dahmer – Monster: The Jeffrey Dahmer Story, and said viewer engagement far outstrips other major streaming services, “with room for growth.

” “After a challenging first half, we believe we’re on a path to reaccelerate growth,” the investor newsletter says. “The key is pleasing members. It’s why we’ve always focused on winning the competition for viewing every day.

When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us. ” Shares, which had drooped 1. 67% during the day, shot up more than 13% in initial after-hours trading, briefly topping $274 a share.

That’s still far below the stock’s stratospheric heights of last November, when prices topped $685 a share. Prices plummeted after a disastrous April earnings call, when the company reported its first drop in subscribers in a decade, followed a quarter later by an even bigger drop of about 1 million subscribers. MORE FOR YOU They Inherited Billions Upon Billions: Meet America’s Richest Heirs The Soho House Of Web3 Launches In Paris And Everyone’s Invited Tuesday, October 18.

Russia’s War On Ukraine: News And Information From Ukraine The relatively small initial drop, however, sent investors to the exit door, forcing the company to begin cutting spending, laying off hundreds of employees and contract workers, killing some projects, and most notably announcing a new ad-supported tier, which launches in 16 days. Netflix’s drop also forced a reckoning on the rest of the industry as investors began looking at metrics beyond subscriber adds, and started pushing companies to say when they’d begin making money on streaming. For most, the answer is 2024 or after.

Netflix appeared to answer all those questions for itself on Tuesday: It’s beating forecasts, at least its own, as it slightly exceeded expected revenue, operating income and membership; It’s growing again, adding 2. 4 million subscribers, to 223. 09 million worldwide, a rise of 4.

5% year over year; It’s making hits. Beyond Monster and some other Dahmer-related programming, the company debuted several other big hits, including Season 4 of Stranger Things (the season’s second half debuted at the very start of the quarter), Korean-made Extraordinary Attorney Woo, $200 million spy thriller The Gray Man, and romantic drama Purple Hearts; People are sticking around to watch a lot. Engagement – one of those newly valued Wall Street metrics – far exceeded competitors in the United States and United Kingdom, with 8.

2 % of video viewing in the UK and 7. 6% of U. S.

; It’s making money, and everyone else isn’t: “Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard – we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix’s $5 to $6 billion annual operating profit. ” The company reported $7.

93 billion in revenue, up 5. 9% year over year, but down slightly from Q2, which hit $7. 97 billion.

The company credited the higher revenue to more subscribers, up 5% Net income hit $1. 398 billion, and diluted earnings per share remained high at $3. 10.

Free cash flow topped $472 million, dramatically up from Q2’s $13 million, and the negative FCF of the second half of 2021. The company forecasted a much tighter set of results for 2022’s last quarter, however, with another decline in revenue, to $7. 78 billion, a big drop in net income to $163 million, and diluted earnings per share to 36 cents.

That’s despite a projected big bump in subscribers again, up 4. 5 million to 227. 59 million worldwide.

LightShed Partners’ Rich Greenfield wondered in a note published before the earnings came out if Netflix’s “approach to advertising (is) primitive on purpose,” designed to milk the $65 billion or so spent annually in legacy broadcast and cable, rather than take on the data-informed precision of YouTube and Facebook. Those legacy ad revenues are seeing a significant outflow to connected TV and streaming as advertisers follow the shift in viewing habits. Also unclear, Greenfield wrote, is how Microsoft’s reported $5 billion in revenue guarantees over the next five years will impact Netflix’s Average Revenue Per User, another newly prized metric.

Microsoft is Netflix’s technology partner on the ad tier. Netflix has long wrung more revenue from its subscribers than most competitors, especially Disney, whose roughly equal global subscriber totals have been plumped by tens of millions of Indian subscribers paying far less per month for Disney+/Hotstar subscriptions. Follow me on Twitter or LinkedIn .

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