Netflix Q2 2023 Earnings Report
Key Takeaways
Netflix reported Q2 2023 revenue of $8.2 billion and operating profit of $1.8 billion, aligning with forecasts. Paid net additions reached 5.9 million. The company is targeting a full-year 2023 operating margin of 18% to 20%.
Successfully launched paid sharing in over 100 countries, with revenue in each region now higher than pre-launch levels and sign-ups exceeding cancellations.
Q2 revenue and operating profit were generally in line with forecasts, with revenue growth expected to accelerate in the second half of 2023 due to paid sharing and ad-supported plan growth.
Netflix leads in streaming engagement, holding the top original streaming series in the US for 24 of the first 25 weeks of 2023 and the top movie for 21 weeks, according to Nielsen.
Focus remains on creating must-watch content, improving monetization, growing the enjoyment of games, and enhancing the service for members to reaccelerate growth.
Netflix
Netflix
Netflix Revenue by Segment
Forward Guidance
Netflix anticipates revenue growth to accelerate in the second half of 2023, driven by increased monetization from paid sharing and continued expansion of the ad-supported plan. For Q3 2023, the company forecasts revenue of $8.5 billion, a 7% year-over-year increase. They expect Q3 operating income of $1.9 billion and an operating margin of 22%.
Positive Outlook
- Revenue growth will accelerate in the second half of 2023 as monetization grows from our most recent paid sharing launch.
- Expansion of paid sharing initiative across nearly all remaining countries.
- Continued steady growth in our ad-supported plan.
- Q3 revenue forecast of $8.5B, up 7% year over year on both a reported and F/X neutral basis.
- Q3 operating income of $1.9B vs. $1.5B in Q3’22 and operating margin of 22% compared with 19% in the year ago period.
Challenges Ahead
- F/X neutral ARM to be flat to slightly down year over year, as we are lapping price increases in 2022.
- Revenue from advertising and our extra member feature are not yet material enough to offset these factors.
- Building an ads business from scratch isn’t easy and we have lots of hard work ahead.
- The ongoing WGA and SAG-AFTRA strikes.
- May create some lumpiness in FCF from 2023 to 2024
Revenue & Expenses
Visualization of income flow from segment revenue to net income