Netflix (NASDAQ:NFLX) is set to report results for its fourth and final quarter of 2020 on Tuesday after the market close. And while its results in 2020 have been extraordinary overall, the bulk of the growth happened in the first half of the year. People were signing up for its service by the tens of millions at the onset of the pandemic, but that subscriber growth slowed in the third quarter.

This latest period will be an interesting one as coronavirus cases are still surging worldwide, and perhaps people were again drawn to in-home entertainment options like Netflix during the holiday season. Here are three things investors will want to follow closely when the streaming company reports.

Popular Netflix show Stranger Things shown on its app.

Image source: Netflix.

Can subscriber growth continue without increasing content spending?  

First and foremost, investors will want to look at net subscriber growth at Netflix. In the most recent quarter, the company added 2.2 million subscribers, compared to the 6.8 million it added in the year-ago period. The slowdown's main cause was the substantial increase in members in the first half of the year -- those who were planning on signing up already did. Overall, Netflix has added 28.1 million subscribers in the first three quarters of 2020, which is already more than it added in all of 2019 (27.8 million).

Second, those following the company will want to know the average revenue generated per user (ARPU) in the fourth quarter. Most of the growth in paying members is coming from regions where the company charges less per month to access its service. ARPU varies based on geography, and it can be as high as $13.40 for members from the U.S. and Canada and as low as $7.27 for Latin American members. 

Lastly, investors will want to hear what management has to say about content spending. Netflix has benefited from the industrywide slowdown in spending since the start of the pandemic. That development caused the company's free cash flow to turn positive and trend upwards for three straight quarters. It appears, however, that spending on production is picking back up. Since the pandemic began, Netflix has produced 50 projects, but the company expects that pace to increase with shooting for 150 projects completed by the end of the fourth quarter. The sudden increase, and the associated safety protocols it will have to implement to protect against coronavirus outbreaks at worksites, may take their toll on free cash flow.  

Still, increasing investments in content may be necessary now that competition for streaming subscribers is heating up. Disney's services are growing fast, and Disney+ has already reached a subscriber total approaching half of Netflix's count despite only being around since Nov. 2019. 

What this could mean for investors 

Average analyst expectations on Wall Street are for Netflix to report revenue of $6.61 billion and earnings per share of $1.38, which would be year-over-year increases of 21% and 6%, respectively. Management is guiding for subscriber additions of six million, meaning growth would reaccelerate from the third quarter. This is likely a reflection of the expected increase in demand for streaming entertainment as the pandemic raged on through the end of 2020.

If this media giant beats subscriber, revenue, and earnings expectations on Tuesday, look for its shares to add to the nearly 50% gain they've seen in the past year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.