Squid Game (NFLX Earnings)
Netflix (NFLX) is set to report Q4 results today on its website right at the close with a video call to follow at 4:45pm ET.
Current FactSet consensus is for EPS to jump 99% yr/yr to $4.21.
Revenue is expected to grow 14.5% yr/yr to $10.11 bln.
This is expected to be Netflix's first-ever $10 bln quarter.
In October, NFLX guided to Q4 EPS of $4.23 and revenue of $10.128 bln, so analysts are a little below these numbers. A key operating metric is global streaming paid net adds. In Q3, this metric was a healthy +5.07 mln, which was above street estimates.
NFLX had cautioned that Q3 would be lapping the first full quarter with paid sharing last year. That tempered estimates for growth this time around.
Looking ahead, NFLX expects paid net adds to be higher in Q4 than in Q3 due to normal seasonality and a strong content slate.
Netflix no longer officially guides for net adds and in 1Q25 it will stop reporting the metric altogether. Advertising was a bright spot in Q3 with ads membership up 35% quarter on quarter.
Also, ads plan accounted for over 50% of sign-ups in its 12 ads countries (has not been rolled out everywhere yet). Netflix views this metric as a leading indicator about growth in the future for its ads tier. Netflix expects to be at critical scale in each of its 12 ads countries in 2025.
Also, its ad tech platform is on track to launch in Canada in Q4 and more broadly in 2025. Another key metric is operating margin, which we think will become an even more important measuring stick when NFLX phases out reporting its net add metric in 1Q25.
In Q3, it came in at 29.6% vs 28.1% prior guidance. For Q4, NFLX has guided to 21.6%.
NFLX also previously guided to 2025 operating margin of 28%, a slight improvement from 27% in 2024. So we will look for any changes there.
TECHS:
In terms of what to expect, NFLX has reported EPS upside in 6 of the past 7 quarters, including huge EPS beats in Q1 and Q3, which sandwiched a more modest beat in Q2.
The thing about Netflix is that it does not guide in a range like most companies, it gives one number. This leads to more volatility. Finally, the stock has moved nicely higher following its Q3 earnings beat in October. However, it has softened a bit in recent weeks heading into this report. Perhaps that is signaling some nervousness about the Q4 report.
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