Netflix’s Revenues Set To Grow As Membership Swells

Netflix (NASDAQ:NFLX) is set to announce its third-quarter results on Monday, October 16. While competition among over-the-top (OTT) streaming services is intensifying, we expect Netflix to report growth in revenues and subscribers across both the domestic and international markets. However, increases in the cost of content production and marketing expenses will continue to impact profitability and cash flows during the quarter. Below we discuss our expectation for the Q3 results.

• Netflix’s revenues should continue to outperform, and we expect it to beat the guidance of $2.97 billion. We expect the company to report revenues in excess of $3 billion as Netflix’s services witnessed strong adoption in the international market, while revenues from the U.S. streaming market remain stable. Furthermore, we anticipate that the total membership from both international and U.S. streaming services will grow to 109 million during the quarter.
• We expect domestic streaming revenues to improve by 21% y-o-y to $1.57 billion as the company adds substantial net subscribers to the business. Additionally, this division should continue to drive the company’s revenues, as it has a higher average revenue per user (ARPU) than the international segment.
• We expect international streaming revenues to improve by over 50% y-o-y and total membership to swell to over 55 million. However, Netflix’s international operations are still not as profitable as its domestic business, as the company continues to invest heavily in expansion through marketing and content development.
• Netflix is focusing on original programming to develop a competitive edge and has a long-term goal of ensuring that nearly 50% of the content streamed on its platform is original. While this makes sense strategically, this approach will likely continue to erode company’s near-term profitability.

See our complete analysis for Netflix

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