Digital video veteran Netflix (NASDAQ:NFLX) makes kind of a big deal about the accuracy of its guidance targets. The company publishes the same financial projections that management uses for decision-making purposes.

"The quarterly guidance we provide is our actual internal forecast at the time we report," Netflix writes in its quarterly shareholder letters.

We're about to get another earnings report from Netflix after the closing bell tonight. In preparation for that event, let's take a closer look at the accuracy of those internal forecasts in recent quarterly reports.

A red Netflix logo on a stone wall.

Image source: Netflix.

Subscriber additions

A line chart comparing Netflix's subscriber addition guidance to actual results in the last 13 reports.

Data source: Netflix earnings reports.

No metric moves Netflix stock faster than its global net subscriber additions. The company met or beat its guidance targets in five of the last 13 earnings reports. Netflix surprised itself by 18.7% on average, or 9.8% if you exclude the 125% shocker in the first quarter of 2020 due to the COVID-19 lockdown effect. Here's a different look at the percentage-level accuracy of the subscriber projections:

A line chart showing how close Netflix's subscriber addition guidance came to actual results in the last 13 reports.

 Data source: Netflix earnings reports.

The swings tend to be rather large here, reflecting the inherent difficulty of predicting how consumers around the world react to new content, price changes, economic pressures, stay-at-home orders, recent or upcoming launches of competing services, and other potentially game-changing factors. Some of those inputs are under Netflix's own control and others are not.

Revenue

A line chart comparing Netflix's  revenue guidance to actual results in the last 13 reports.

 Data source: Netflix earnings reports.

I included Wall Street's consensus estimates for the revenue and earnings charts, just to show how closely your average analyst will stick to Netflix's official guidance. It's often difficult to tell the analyst line apart from the guidance targets.

It's also tough to separate the actual top-line results from either of the forward-looking projections. This stability follows from Netflix's monthly subscription programs. Revenue simply rises in a predictable way on the heels of large subscriber jumps. Substantial surprises on this line should be rare -- and they are.

Earnings

A line chart comparing Netflix's earnings per share guidance to actual results in the last 13 reports.

 Data source: Netflix earnings reports.

Finally, Netflix has plenty of levers available for controlling its bottom-line results. We've already seen how stable revenue is, and the company controls its expenses below that line. Earnings come in below Netflix's guidance when the company sees unexpected opportunities to run ambitious and expensive marketing campaigns, and they exceed expectations when operating expenses or tax payments are low.

What to expect tonight

Netflix expects second-quarter sales to rise 23% year over year, landing near $6.1 billion. Earnings should triple from $0.60 to $1.81 per diluted share. For what it's worth, the analyst consensus is exactly in line with Netflix's official guidance targets. The company expects 7.5 million net new subscribers this quarter, which would lift the total subscriber count by 26% to 190 million accounts year over year. However, management was less confident than usual: "Given the uncertainty on home confinement timing, this is mostly guesswork. The actual Q2 numbers could end up well below or well above that, depending on many factors including when people can go back to their social lives in various countries and how much people take a break from television after the lockdown."

There you have it. All we really know is that Netflix will report second-quarter sales in the neighborhood of $6.1 billion. The other projections may end up as outliers in either direction the next time I run the numbers this way.