Netflix Q4 2021 Earnings Report Recap

NFLX crushed earnings estimates

Key Takeaways

  • Netflix's global paid streaming memberships missed analysts' expectations.
  • The number of global paid streaming memberships represents how Netflix generates most of its revenue.
  • Netflix's operating margin declined as it spent more on content during the quarter to attract new subscribers.
Netflix Earnings Results
Metric  Beat/Miss/Match Reported Value Analysts' Prediction
EPS Beat $1.33 $0.82
Revenue Match $7.7B $7.7B
Global Paid Streaming Memberships Miss 221.8M 222.1M

Source: Predictions based on analysts' consensus from Visible Alpha

Netflix (NFLX) Financial Results: Analysis

Netflix, Inc. (NFLX) reported mixed Q4 FY 2021 earnings results on Jan. 20, 2022. Earnings per share (EPS) crushed consensus estimates, rising 11.8% compared to the year-ago quarter. Analysts were expecting a decline in EPS of 31.2%. Netflix's revenue just matched analyst forecasts, rising 16.0% year over year (YOY). It was the slowest pace of revenue growth out of any quarter in the past four years. Global paid streaming memberships, also referred to as global paid streaming subscribers, came in at 221.8 million for the quarter, missing analysts' expectations. The company's shares sank as much as 15% in after-market trading. Over the past year, Netflix's shares have provided a total return of -13.2%, below the S&P 500's total return of 16.4%.

NFLX Global Paid Streaming Memberships

Netflix's global paid streaming memberships rose 8.9% YOY, the second slowest pace of growth in at least 14 quarters. Global paid streaming memberships represent the number of global users that have signed up and paid for a subscription to receive streaming services. A core feature of Netflix's strategy is to grow its streaming membership business globally, as it is the company's main source of revenue. Netflix recently surpassed the 200 million mark in total global paid streaming memberships at the end of FY 2020.

Attracting new subscribers is becoming ever more difficult amid an increasingly competitive environment that includes rivals like Apple Inc.'s (AAPL) Apple TV+, The Walt Disney Company's (DIS) Disney+, Amazon.com, Inc.'s (AMZN) Amazon Prime Video, and AT&T Inc.'s (T) HBO Max. Netflix noted in its Q4 letter to shareholders that the added competition may be affecting its marginal growth to some degree. In order to attract new subscribers, Netflix is spending more on boosting the quantity of its content offerings. However, a bigger content budget means higher costs. The company said that its large content slate in the fourth quarter led to a decline in its operating margin.

Netflix is also investing in other types of streaming entertainment, such as video games, to attract subscribers. The company said that its mobile games on Android and iOS debuted globally in November, allowing members to access games from within the Netflix mobile app. It plans to continue expanding its game portfolio in 2022.

NFLX Guidance

Netflix provided forecasts for EPS, revenue, and global paid streaming subscribers for Q1 FY 2022. The company expects EPS of $2.86, which would be down 23.7% YOY. Revenue is expected to rise 10.3% YOY to $7.9 billion. Global paid streaming memberships are forecast to grow 8.0% to approximately 224.3 million.

Netflix Earnings Call Recap

A big challenge for Netflix is that subscriber growth rates have failed to reaccelerate to the levels before the start of the COVID-19 pandemic in early 2020. “Covid has introduced so much noise,” said Netflix Co-Chief Executive Officer (CEO) Reed Hastings during the company’s video call after releasing results. Hastings downplayed the Q4 miss in subscriber growth. Also, Co-CEO Ted Sarandos said the company didn’t see any reductions to its engagement or subscriber retention. “All the fundamentals are pretty solid,” he said.

Netflix's next earnings report (for Q1 FY 2022) is estimated to be released on April 18, 2022.

Article Sources

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  2. Visible Alpha. "Financial Data." Accessed Jan. 20, 2022.

  3. CNBC. "Netflix Shares Fall 15% on Slowing Subscriber Growth." Accessed Jan. 20, 2022.

  4. TradingView. "Price Chart: NFLX and S&P 500." Accessed Jan. 20, 2022.

  5. Netflix Inc. "Form 10-K for the Fiscal Year Ended December 31, 2020," Page 21. Accessed Jan. 20, 2022.

  6. Netflix Inc. "Form 10-K for the Fiscal Year Ended December 31, 2020," Page 1. Accessed Jan. 20, 2022.

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  8. The Wall Street Journal. "Netflix Raises Subscription Prices in U.S., Canada." Accessed Jan. 20, 2022.

  9. Netflix Inc. "Q421 Shareholder Letter," Page 5. Accessed Jan. 20, 2022.

  10. Wall Street Journal. "Netflix Shares Sink as Company Sees Subscriber Growth Slowing." Accessed Jan. 21, 2022.

  11. Yahoo! Finance. "Earnings Calendar: NFLX." Accessed Jan. 20, 2022.

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