Giant streaming service Netflix has reported significant growth in its Third Quarter (Q3) 2023 earnings and has raised its premium subscription plan.
Netflix’s third quarter (Q3) financials were in line with its forecast revenue of $8.5B, paid net adds of 9M, and operating margin of 22.4%.
Revenue in Q3’23 grew 8% year-over-year on a reported and a foreign exchange (F/X) neutral basis2. This was slightly above the company’s forecast due to higher-than-expected member growth. Netflix also added nearly 9 million subscribers globally, surpassing Wall Street’s forecast of 6 million.
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Revenue growth in Q3 reflected an increase in average paid memberships (8.8M paid net additions vs. 2.4M in Q3’22) due to the rollout of paid sharing, strong, steady programming, and the ongoing expansion of streaming globally.
Q3’23 operating income totaled $1.9B vs. $1.5B last year (up 25% year over year), slightly above the company’s guidance forecast due to the revenue upside and timing of content and other spending.
ARM3 decreased 1% year-over-year both on a reported and F/X neutral basis, in line with Netflix expectations. This was due to a number of factors, including a higher percentage of membership growth from lower ARM countries, limited price increases over the past 18 months, and some shifts in the plan mix.
Netflix delivered an operating margin of 22.4% (vs 22.2% forecast), up three percentage points vs. the year-ago quarter. EPS in Q3 was $3.73 vs. $3.10 and included a $173M million non-cash unrealized gain from F/X remeasurement on our Euro-denominated debt, which is recognized below operating income in “interest and other income.
The company’s stock price soared more than 12% in extended trading after the latest quarterly numbers came out. Netflix shares reportedly increased by about 30% so far this year amid mounting evidence its video-streaming service is faring better than most in a crowded field of competitors that are testing the financial limits of many households.
Also, Netflix has impressively picked up more than 16 million subscribers through the first nine months of the year, already eclipsing the 8.9 million subscribers that it added all of last year.
However, it’s still a fraction of the more than 36 million additional subscribers that Netflix attracted in 2020 during the lockdown period.
In an effort to generate more revenue, Netflix announced plans to raise the price for its most expensive streaming service by $2 to $23 per month in the U.S., a 10% increase, and its lowest-priced, ad-free streaming plan to $12, another $2 bump.
The $15.50 per month price for Netflix’s most popular streaming option in the U.S. will remain unchanged, as will a $7 monthly plan that includes intermittent commercials.