Key Financial Indicators
- Revenue: $11.51 billion (+17% year-over-year)
- Operating income: $3.25 billion (+12%)
- Operating margin: 28.2%
- Net income: $2.55 billion (+8%)
- Diluted EPS: $5.87
- Free cash flow: $2.66 billion
Netflix saw its global revenue boosted during the third financial quarter (Q3) of the year from strong subscription sales and an uptick in advertiser spending, the streaming platform announced on Tuesday.
During Q3, Netflix earned $11.51 billion in global revenue, up 17 percent on a year-over basis. Operating income reached $3.25 billion, up 12 percent from the same quarter last year, though the company’s operating margin fell to 28 percent from 30 percent after recording a $619 million expense related to an ongoing tax dispute in Brazil. Netflix said the charge, which covers several years of non-income tax assessments, reduced its Q3 margin by more than five percentage points but is not expected to have a material future impact.
Net income for the quarter totaled $2.55 billion, up from $2.36 billion a year ago. Diluted earnings per share came in at $5.87, missing internal forecasts by about $1 due to the one-time tax expense.
Shares of Netflix fell as much as 7 percent in after-hours trading Tuesday, based largely on the company’s tax issue in Brazil, which resulted in a “miss” on operating income when compared to Wall Street estimates.
Regionally, revenue in the U.S. and Canada rose 17 percent to $5.07 billion, while revenue from Europe, the Middle East and Africa (EMEA) climbed 18 percent to $3.7 billion. Latin America (LATAM) revenue increased 10 percent to $1.37 billion, and Asia-Pacific grew 21 percent to $1.37 billion.
The company recorded $2.83 billion in net cash from operations and $2.66 billion in free cash flow, both up from the prior year. Netflix now expects free cash flow of roughly $9 billion for the full year, higher than previous guidance of $8 billion to $8.5 billion, reflecting lower content spending and favorable cash timing, Netflix said.
In its letter to shareholders on Tuesday, executives highlighted record engagement in key markets, with Netflix achieving its highest-ever viewership share in the United States and United Kingdom, up 15 percent and 22 percent respectively since late 2022. The quarter’s hits included the second season of “Wednesday,” the comedy sequel “Happy Gilmore 2,” and South Korea’s “Your Majesty.” Its animated feature “KPop Demon Hunters” became the streamer’s most popular film ever with 325 million views.
Netflix also said its advertising business doubled its U.S. upfront commitments, aided by the rollout of its proprietary Netflix Ads Suite and upcoming integrations with Amazon’s and AJA’s demand-side platforms. For the fourth quarter, Netflix projects $11.96 billion in revenue, up 17 percent year over year, with an operating margin of 23.9 percent.
Revenue and content were focal points of Netflix’s shareholder letter, now that the streaming company has decided to stop reporting subscriber counts. Instead, Netflix asserts engagement is a better metric of the overall health of its business. The streaming platform is typically one of the top services in Nielsen’s monthly “The Gauge” report, which evaluates time spent with TV during a monthly measurement period.
