As is the case every quarter, Netflix (NFLX 2.51%) is one of the first mega-cap companies scheduled to report quarterly results. The streaming-TV service giant is scheduled to report its first-quarter update less than two weeks from now, on April 19.
With shares of the streaming-TV giant losing more than a third of their value over the last three months, investors will undoubtedly be watching the company's quarterly earnings release closely. Increasing competition, a challenging macroeconomic environment, and a pull forward in subscriber growth during lockdowns have been some of the more prominent concerns among Netflix investors recently. Perhaps the company's first-quarter update can alleviate some of these concerns.
Ahead of the first-quarter update, here's a preview of some of the key areas investors are going to want to check on when the print is live.
1. Subscriber additions
As always, an important focus for investors will be Netflix's net paid subscriber additions. In Q3, Netflix saw a re-acceleration in its quarterly subscriber growth, as net additions came in at 8.3 million. Though this was notably below the 8.5 million net new subscribers the company had estimated it would add during the quarter, it was still good to see a significant sequential uptick from the 4.4 million members the company added in the prior quarter.
But what likely spooked investors was management's guidance for just 2.5 million net new paid subscribers in the first quarter of 2022. This would be down significantly from the 4.0 million the company added in the first quarter of 2021. This weak outlook, management explained, reflects the quarter's back-end weighted content slate.
2. Commentary on competition
Another red flag for Netflix investors in Q4 was management's nod to increasing competition. In a rare acknowledgment of competition having a negative impact on the company, management said, "added competition may be affecting our marginal growth some..."
Investors should look to see if management doubles down on this worrisome narrative or if it brings positive data points to the table regarding how it is faring in a competitive environment. Chances are, the worrisome remarks about competition will continue. But investors should note that the stock's big decline has arguably priced in expectations for heated competition going forward.
Image source: Getty Images.
3. Subscriber-growth guidance
Of course, another key metric to watch will be the company's guidance for subscriber growth in the second quarter of 2022. Technically, a back-weighted content slate in Q1 should positively impact Q2. Further, it's no secret that content production has been ramping back up from periods when much of the world was facing lockdowns. So lots of new content from Netflix should provide a catalyst for reaccelerated subscriber growth, assuming increasing competition isn't providing too much negative pressure.
While it's always tough to estimate how many subscribers Netflix will guide for, it would be nice to see guidance for second-quarter subscriber levels on par with pre-COVID levels again. To do this, the company would need to guide for around 2.7 million new subscribers in Q2.
Netflix is scheduled to report its first-quarter results after market close on Tuesday, April 19.
