Growth in Revenue and EPS Amidst Challenges: Netflix Q3 2023 Earnings Preview

Netflix Inc., the internet television network that is a global leader, will release its third-quarter earnings report for 2023 on Wednesday, October 18th, 2023, after the market closes.

It also expects revenue growth to accelerate in the second half of 2023, driven by the launch of paid sharing.

Starting May 23rd, Netflix introduced a paid-sharing model in the US that prohibits free account sharing with people outside of one's household. Similarly, in Q3, Netflix implemented this policy in India, allowing only members of a household to access a shared account.

Moreover, it is anticipated that the upcoming earnings report will show a slight increase in top-line growth due to the introduction of ad-supported, low-priced plans.

In the upcoming earnings report, it is anticipated that Netflix's extensive game portfolio has contributed to an increase in user engagement. In the third quarter, the company launched four new games, such as SNK Corporation's Samurai Shodown, LEGO Legacy: Heroes Unboxed by Gameloft, WrestleQuest by Mega Cat Studios, and Cut the Rope Daily by Zeptolab.

Netflix's average revenue per membership (ARM) has been consistently increasing over the past few years; however, in 2021, it began to decline, which may have been further accelerated by the announcement of the ads tier in November 2022. In the upcoming earnings report, it is expected that the ARM will continue decrease, as Netflix hasn't raised its prices and has indicated that it does not anticipate a significant impact on revenue from the ads tier in the near future.

One of the ways that sets Netflix apart from its competitors is its emphasis on original content. Netflix produces a diverse array of original shows and movies, spanning across various genres such as comedy, drama, and documentaries.

Another factor that sets Netflix apart from its competitors is its worldwide presence. The company operates in more than 190 countries and territories, giving it an extensive global reach.

Due to its unique features as compared to its competitors, Netflix has been able to establish itself as the top streaming service globally.

Netflix is facing fierce competition from various streaming services such as Disney's Disney+, HBO Max, Comcast's CMCSA Peacock, Paramount+, Apple TV+ , and Amazon Prime Video. It is also facing competition for consumer time from linear TV, YouTube, short-form entertainment like TikTok and gaming.

Despite intense competition in the streaming industry, Netflix has demonstrated its ability to thrive as a business with its strong execution and focus.The company's share of the streaming market continues to expand, resulting in a loss of market share for its competitors. As of June 2023, Netflix accounted for 37.7% of TV screen time in the US, up from 26% in May 2021 according to Netflix.

Netflix was notably impacted by the Hollywood strike, as it resulted in the delay of production for many of the company's original shows and movies. This slowdown in content production may have played a role in Netflix's subscriber losses during Q1 2023.

Despite the challenges posed by the Hollywood strike, Netflix is better positioned than its competitors. The company has an extensive collection of original content that was produced prior to the strike's impact. Additionally, Netflix boasts a wealth of creative talent and remains dedicated to investing in new content production.