Earnings season is ramping up, and two hot stocks are set to report next week: streaming-TV giant Netflix (NFLX -1.35%) and business productivity software company Atlassian (TEAM -2.32%). With both companies seeing breakneck growth in their underlying businesses recently, expectations are high going into their upcoming quarterly earnings releases.

For Netflix's fourth quarter, investors will look for a strong original content slate and a continued global expansion to help drive the company's operating margin to new heights. Meanwhile, those watching Atlassian will want to check on its surging growth in subscription revenue.

Netflix streaming on multiple devices

Image source: Netflix.


The first of these two companies to report next week is Netflix, which will post earnings on Monday, April 16, after market close.

Though there will be plenty for investors to watch in its fourth-quarter results, including growth in streaming revenue and members and its international contribution margin, one of the most insightful metrics from the period will be the company's operating margin. Netflix has seen significant progress in its operating margin recently, with its full-year operating margin rising from about around 4% in both 2015 and 2016 to 7.2% in 2017. Yet management expects this metric to keep rising rapidly, guiding for a 10% full-year operating margin in 2018.

Investors will get to see if Netflix is making progress toward this target when the company reports its first-quarter results. For its first quarter, management forecasts an operating margin of 9.8%.

On average, analysts are anticipating fourth-quarter revenue and earnings per share of $3.69 billion and $0.64, up from $2.64 billion and $0.40 in the year-ago period, respectively. 


Atlassian's second quarter of fiscal 2018, which ended on Dec. 31, 2017, was exceptional for the collaboration and productivity software provider. Revenue and adjusted EPS share surged 43% and 44% year over year. 

This growth story has benefited from surging subscription revenue. In Q2, subscription revenue was up 70% year over year. Thanks to the segment's more rapid ascent there than revenue in its maintenance segment during the same period, subscription growth is now Atlassian's largest segment; in the year-ago quarter, maintenance revenue exceeded subscription revenue by nearly $9 million.

Investors should look for momentum in subscription revenue to persist in Q3. Since management's guidance for overall revenue implies a slight deceleration, with the middle of the guidance range representing 36% year-over-year growth compared to 43% year-over-year growth in Q2, Atlassian's subscription revenue growth will likely decelerate in Q3. But investors should make sure any deceleration isn't too sudden, as investors are counting on this catalyst to continue driving strong growth for the company for years to come. I'll be looking for year-over-year growth in subscription revenue of 60% or more.

The consensus analysts estimate for Atlassian's third-quarter revenue and EPS are $218 million and $0.08, respectively -- this compares to $160 million and $0.08 in the year-ago quarter.

Atlassian will report its third-quarter results after market close on April 19.