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Netflix Earnings: Here's What Investors Should Know

By Parkev Tatevosian, CFA – Oct 13, 2021 at 6:07AM

Key Points

  • Analysts estimate Netflix will report revenue of $7.48 billion and earnings per share of $2.56 in Q3.
  • That closely matches management's guidance for the third quarter.
  • CEO Ted Sarandos said, "Squid Game" could be the most popular show on its platform ever.

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The hit show "Squid Game" could propel Netflix to beat estimates when it reports third-quarter earnings on Oct. 19.

Amid the popularity of its new hit series Squid Game, Netflix (NFLX 3.14%) is scheduled to report third-quarter earnings on Oct. 19. The streaming giant is hoping the Korean language show will attract subscribers.

Netflix experienced a surge in new customers at the pandemic onset as folks cooped up at home were looking for entertainment options that could be consumed safely. The company is holding onto those gains, for the most part, even as economies are reopening. Here's what investors should know heading into Netflix's third-quarter earnings release. 

Two people on their couch watching television.

Image source: Getty Images.

Investing in international growth 

For its fiscal third quarter, Netflix is forecasting it will add 3.5 million paying subscribers to reach a total of 212.68 million. However, the massive success of Squid Game could cause Netflix to eclipse the estimates.

CEO Ted Sarandos revealed that the show is the most popular non-English language show and is on its way to becoming the most popular show ever on the platform. That kind of success for a new series tends to attract more subscribers, and certainly, management could not have expected it to be this popular when they were projecting subscriber growth in late July.

The Korean-language hit has the potential to accelerate growth in one of the fastest-growing regions for Netflix, the Asia-Pacific, which added the most subscribers (1.02 million) in the most recent quarter. Netflix is investing in regional content to spur the growth of international users -- more than double the spending on non-English content in the last two years.

The international segment is taking on more importance, as only 74 million of its 209 million subscribers reside in the U.S. and Canada. The trend will only further skew international because of the vast population that can potentially become subscribers, whereas signs of a saturated domestic market are appearing in slower comparative subscriber growth.

Netflix has a good chance to beat analyst estimates

Analysts on Wall Street expect Netflix to report revenue of $7.48 billion and earnings per share (EPS) of $2.56 in Q3, which would be increases of 17.2% and 47%, respectively, from the same quarter of the year before. That closely matches management guidance for revenue and earnings per share for Q3, suggesting the market has not adjusted forecasts upward based on the success of Squid Game

One reason analysts could be hesitant about raising estimates is an announcement from Disney (DIS 0.90%) CEO Bob Chapek warning investors late in September that Disney+ is facing headwinds that could result in lower-than-expected subscriber growth. Still, the headwinds Chapek described, such as partnership agreements, annual subscription renewals, and a slowdown in content production were all specific to Disney and unlikely to negatively affect Netflix.

Therefore, it seems likely that Netflix will beat revenue and earnings per share estimates when it reports third-quarter results. The stock has already achieved healthy gains in 2021 and over the last several years, and it continues to produce hit shows that keep viewers around. If it indeed beats revenue and EPS estimates, the report could be another catalyst sending the stock higher.  

Parkev Tatevosian owns shares of Walt Disney. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.

Stocks Mentioned

Netflix Stock Quote
Netflix
NFLX
$320.01 (3.14%) $9.75
Walt Disney Stock Quote
Walt Disney
DIS
$93.38 (0.90%) $0.83

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