Netflix (NFLX) will release its Q2 results today on its website at market close, followed by a video call at 4:45 PM ET.

Analysts expect a 44% year-over-year increase in EPS to $4.74, and a 16% rise in revenue to $9.53 billion. In April, Netflix had forecasted Q2 EPS of $4.68 and revenue of $9.491 billion, so the analyst projections are slightly higher. This would be the second consecutive quarter with over $9 billion in revenue for Netflix.

One important metric is global streaming paid net adds, which was an impressive +9.33 million in Q1, surpassing street estimates. Although Netflix no longer provides official guidance for net adds and will stop reporting this metric in Q1 2025, it did mention in its Q1 call that Q2 net adds are expected to follow typical seasonal patterns and be lower than Q1. Netflix has seen significant net adds in Q3-Q1 after cracking down on password sharing.

Another key metric is the operating margin, which is expected to gain importance once Netflix stops reporting net adds. In Q1, the operating margin was 28.1%, up from the previous guidance of 26.2% and 16.9% in Q4. Netflix also raised its full-year 2024 forecast to 25% from 24% and guided for a Q2 margin of 26.6%. However, it cautioned that margins could fluctuate due to currency exchange rates, content spending, and other investments.

Despite strong Q1 results, the stock dropped due to concerns about the second half of the year. Netflix expects full-year 2024 revenue growth of 13-15%, with 15% growth in Q1 and an estimated 16% in Q2, indicating a possible slowdown in the second half of 2024. This is partly because the previous year's growth was boosted by the introduction of paid sharing and the ads business. Additionally, a stronger dollar has created some headwinds.

TECHS:

Netflix has exceeded EPS expectations in five of the past six quarters, including a significant beat in Q1. While the stock initially dropped after the Q1 report, it recovered and traded higher, though it has weakened in recent weeks. Investor sentiment appears cautious ahead of the Q2 report.

The stock will either come out of this with a double top or likely an all time high that sets the market tone.

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