Netflix (NFLX) is set to report Q2 results today on its website right at the close with a video call to follow at 6pm ET.
Current S&P CapitalIQ consensus is for EPS to grow 98% yr/yr to $3.15 and for revenue to grow 19% yr/yr to $7.32 bln.
In April, NFLX guided to EPS of $3.16 and revenue of $7.30 bln. NFLX also guided to Q2 global streaming net adds of +1.00 mln.
The most important operating metric to watch for s global streaming net adds.
After missing prior guidance in Q3, NFLX rebounded with strong sub net add upside in Q4. That said, Q1 came in at just +3.98 mln vs prior guidance of +6.00 mln and Q2 guidance at just +1.00 mln was pretty paltry.
NFLX was crushing tough comps in Q1 and Q2 at 15.77 mln and 10.09 mln, respectively.
Other important metrics, UCAN (US & Canada) ARPU keeps growing.
This metric is a proxy for pricing power. NFLX has been able to raise their prices without issue in the last couple several years. As such, ARPU came in at $14.25 in Q1, up sharply from $13.51 in Q4 and $13.40 in Q3. NFLX rolled out a US price increase in Q4 and now we're seeing the effect roll into the ARPU metric.
Operating margin has been another bright spot.
It was at a record 27.4% in Q1 vs 25.0% prior guidance and vs 16.6% a year ago. NFLX also guided to Q2 operating margin of 25.5%. Net adds are what everyone focuses on, but we think this margin expansion merits recognition as well. This shows the benefit of the price increase and higher revs while at the same time production costs being reduced.
Gaming
The final topic I’ll be watching for will be any input on expanding into video games. NFLX reportedly made a hire in the area recently, so it will be good to get some commentary.
TECHS:
NFLX has been in a year long consolidation, trading sideways between $475 and $575 since July 2020. This despite the fact that other tech names have been soaring.
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