Netflix's disappointing results
What’s happening:-
Shares of Netflix fell in after-hours trading on Tuesday following the company’s release of its third-quarter results.
What happened:-
The streaming giant reported weaker-than-expected earnings for the latest quarter.
Shares fell despite Netflix issuing its guidance slightly above market expectations for the rest of the year.
How were the results: The company reported double-digit revenue growth for the third quarter.
Revenue jumped 17.2% year-over-year to $11.51 billion, almost in-line with consensus estimates of $11.514 billion.
Earnings came in at $5.87 per share, missing Wall Street expectations of $6.97 per share.
Netflix shares fall
Why it matters:-
Netflix is facing tough competition from YouTube, Disney+ and Amazon’s Prime Video.
The company, with a global customer base of more than 300 million, is looking to expand in new segments, including advertising and videogames.
Netflix said membership growth, higher pricing and growth in advertising sales provided a boost to its overall revenues in the latest quarter.
Operating margins came in at 28% for the quarter, below its guidance of 31.5%. The company attributed this to the current dispute with Brazil’s tax authorities. Excluding the impact of the dispute, the company’s operating margin would have been above its projections.
Netflix shares
Netflix reported the highest quarterly view share in the US and UK since the fourth quarter of 2022. The company also had its strongest quarter ever for advertising sales.
The company highlighted key titles in the quarter, including Happy Gilmore 2, Wednesday, Your Majesty from South Korea, and KPOP Demon Hunters.
For the fourth quarter, Netflix guided to revenues of $11.96 billion, up 16.7% year-over-year, higher than market estimates of $11.90 billion. Management projected earnings of $5.45 per share, slightly better than consensus of $5.42 per share.
For the full fiscal year, Netflix guided to revenues of $45.1 billion, up 16% year-over-year.
Netflix
How shares responded:-
Shares of Netflix fell 6.5% to $1,160.94 in after-hours trading on Tuesday. The stock had surged 39% year to date.
What to watch: Investors will keep an eye on the current quarter’s content, which is expected to provide further a boost to the company’s overall results. Netflix highlighted content for the fourth quarter as The Diplomat, Stranger Things, Frankenstein, A House of Dynamite, Squid Game: The Challenge Season 2. It also highlighted its upcoming boxing match, Jake Paul vs. Tank Davis and two National Football League games on Christmas for the quarter.