What happened

Shares of Netflix (NFLX 2.47%) climbed by 24% in October, according to data provided by S&P Global Market Intelligence.

Despite the rise, shares of the streaming television company are still down by 51% year to date.

TV Controller Pointing at Multiple TV Screens

Image source: Getty images.

So what

Netflix released its third-quarter earnings results, which felt like a breath of fresh air for investors. Revenue inched up 5.9% year over year to $7.9 billion while net income came in at $1.4 billion, slightly lower than the $1.44 billion chalked up in the prior year. But it was the streaming paid membership number that got investors excited. The company added 2.41 million paid members in the last three months, ending its consecutive two-quarter run of declining subscribers. This number was also significantly higher than the 1 million subscribers that Netflix estimated, and seemed to assure investors that the company was back in growth mode. 

Netflix is not in the clear yet, though. It suffered a more than a 4-percentage-point year-over-year fall in its operating margin to 19.3% in the quarter, which was blamed entirely on the strengthening of the U.S. dollar. The company also forecast revenue for the fourth quarter coming in at $7.78 billion, up barely 1% year over year. Net income is projected to plunge sharply to just $163 million from the $1.4 billion chalked up in the prior year. On the bright side, the quarter saw healthy operating and free cash flow generated, continuing its run of free cash flow generated for 2022.

Now what

With competition nipping at its heels, Netflix has launched new ad-supported plans in 12 countries this month that target price-conscious consumers. Collectively, these 12 countries account for around 75% of global advertising spend across television and streaming, making it a lucrative market for its first-ever launch of such a tier. The company will start with just one plan, Basic with Ads, which is priced around 20% to 40% lower than its equivalent ad-free plans.

The company has also devised a plan to monetize account sharing by offering the choice to create new accounts and sub-accounts for family and friends. More details will be provided once this initiative starts rolling out in early 2023. On the games front, Netflix has more than 55 games in development and will focus on creating more games in the next few years to tie in with their TV series and movie offerings.