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Streaming video giant Netflix (NASDAQ: NASDAQ:NFLX) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 16.8% year on year to $9.56 billion. On the other hand, the company expects next quarter's revenue to be around $9.73 billion, slightly below analysts' estimates. It made a GAAP profit of $4.88 per share, improving from its profit of $3.29 per share in the same quarter last year.
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Netflix (NFLX) Q2 CY2024 Highlights:
- Revenue: $9.56 billion vs analyst estimates of $9.53 billion (small beat)
- EPS: $4.88 vs analyst estimates of $4.74 (2.9% beat)
- Revenue Guidance for Q3 CY2024 is $9.73 billion at the midpoint, below analyst estimates of $9.81 billion
- Gross Margin (GAAP): 45.9%, up from 42.9% in the same quarter last year
- Free Cash Flow of $1.21 billion, down 43.3% from the previous quarter
- Global Streaming Paid Memberships: 277.7 million, up 39.26 million year on year
- Market Capitalization: $279 billion
Consumer SubscriptionConsumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to, what movie they watch, or even finding a date, online consumer businesses are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have further increased usage and stickiness of many online consumer services.
Sales GrowthNetflix's revenue growth over the last three years has been unremarkable, averaging 9.7% annually. This quarter, Netflix reported 16.8% year-on-year revenue growth, in line with analysts' expectations.
Guidance for the next quarter indicates Netflix is expecting revenue to grow 13.9% year on year to $9.73 billion, improving from the 7.8% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 13.1% over the next 12 months.
Usage Growth As a subscription-based app, Netflix generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the last two years, Netflix's users, a key performance metric for the company, grew 9.7% annually to 277.7 million. This is decent growth for a consumer internet company.
In Q2, Netflix added 39.26 million users, translating into 16.5% year-on-year growth.
Revenue Per UserAverage revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Netflix because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time).
Netflix's ARPU has declined over the last two years, averaging 1.3%. Although the company's users have continued to grow, it's lost its pricing power and will have to make improvements soon. This quarter, ARPU grew 0.2% year on year to $34.43 per user.
Key Takeaways from Netflix's Q2 Results It was great to see Netflix increase its users this quarter, enabling it to beat Wall Street's revenue, operating margin, and EPS estimates. We were also glad its full-year EPS guidance topped expectations, but its quarterly and full-year revenue outlook fell short. The forecasted top-line metrics were ultimately what the market cared more about, so this was a tough quarter for Netflix. The stock traded down 2.3% to $628.20 immediately following the results.
