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Netflix
🇺🇸 NASDAQ:NFLX
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Sep 30, 2023

Netflix Q3 2023 Earnings Report

Netflix's Q3 2023 financials aligned with or exceeded forecasts, demonstrating strong growth in revenue, paid net additions, and operating margin.

Key Takeaways

Netflix reported Q3 2023 revenue of $8.5 billion, with 9 million paid net additions and an operating margin of 22.4%. The company increased its FY23 free cash flow forecast to approximately $6.5 billion and repurchased $2.5 billion in shares. Adoption of the ads plan continues to grow, with membership up almost 70% quarter-over-quarter.

Q3 financials were in line with or ahead of forecast with revenue of $8.5B, paid net adds of 9M and operating margin of 22.4%.

FY23 free cash flow is now expected to be ~$6.5B, up from the prior forecast of at least $5B.

Adoption of the ads plan continues to grow, with ads plan membership up almost 70% quarter-over-quarter.

The company repurchased $2.5B of shares in Q3 and increased the buyback authorization by $10B.

Total Revenue
$8.54B
Previous year: $7.93B
+7.8%
EPS
$3.73
Previous year: $3.1
+20.3%
Gross Profit
$3.61B
Previous year: $3.14B
+15.1%
Cash and Equivalents
$7.35B
Previous year: $6.11B
+20.3%
Free Cash Flow
$1.89B
Previous year: $472M
+300.0%
Total Assets
$49.5B
Previous year: $47.6B
+4.1%

Netflix

Netflix

Netflix Revenue by Segment

Forward Guidance

Netflix forecasts Q4 2023 revenue of $8.7 billion, up 11% year-over-year, and expects paid net additions will be similar to Q3 2023. The FY23 operating margin guidance forecast is updated to 20%.

Positive Outlook

  • Q4’23 revenue of $8.7B, up 11% year-over-year, or 12% on an F/X neutral basis.
  • For the fourth quarter, paid net additions will be similar to Q3’23 (+/- a few million).
  • Updating FY23 operating margin guidance forecast to 20%, the high end of the prior 18% to 20% forecast.
  • Assuming no material swing in F/X rates, we currently expect an operating margin in FY24 of 22% to 23%.
  • Expects cash content spend of up to ~$17B in 2024.

Challenges Ahead

  • Global ARM in Q4 is expected to be roughly flat year-over-year, primarily due to limited price increases over the last eighteen months.
  • The US dollar strengthened versus other currencies, representing a roughly $200M expected drag on Q4 revenue and ARM.
  • The strikes will create some lumpiness in FCF over the 2023/2024 period.
  • Negotiations with SAG-AFTRA are ongoing.
  • Ad revenue would not be material to our business in 2023.

Revenue & Expenses

Visualization of income flow from segment revenue to net income

Company Overview

Full financial data and analysis

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