Earnings season is here, and Netflix (NFLX -1.03%) is one of the early voices chiming in with fresh financials this week. The leading premium streaming video service will report its second-quarter results after the market close on Wednesday.

Netflix investors have to feel pretty good heading into the critical update. The stock enters this trading week 50% higher so far in 2023. Zoom into a more critical time frame, and the shares are up 37% since initially selling off the day after a disappointing first-quarter report in April. 

Momentum is clearly on Netflix's side. Even an initially poorly received performance -- as the market saw last time out -- isn't fatal. This doesn't mean that shares are coated in Teflon. Netflix still has a lot to prove this time, especially given its buoyant stock chart. Let's take a closer look. 

Stream team

Guidance issued by Netflix in mid-April calls for uninspiring year-over-year growth. Revenue of $8.242 billion for the three months ending in June would be a mere 3.4% increase from the second quarter of last year. Its outlook for operating profit, net income, as well as margins on both fronts is lower. Earnings of $2.84 a share translates into an 11% decline. 

Despite the stock's market-thumping surge since the first quarter's call, Wall Street isn't swaying much from what Netflix was seeing three months ago. Analysts are modeling a 3.8% increase in revenue to $8.28 billion, and the consensus profit target is the same $2.84 a share pulled from Netflix's initial guidance. 

Two people huddling together on the sofa as they watch something scary on TV.

Image source: Getty Images.

It's easy to see why market pros aren't assuming that Netflix is lowballing its official forecasts. Netflix has proven mortal lately. Revenue and subscriber guidance fell short last time out. This still should be one of the hardest quarters for analysts to figure out. 

This will be the first full quarter since founder and longtime CEO Reed Hastings took a step back in late January, but there are other major factors that will weigh on the success or failure of Wednesday afternoon's financial update. Let's start with the Netflix finally starting to crack down on password sharing midway through the second quarter. Netflix has said that nearly half of its subscribers are sharing their accounts with family and friends living outside of their membership households. 

There's a lot riding on how the rollout plays out. Subscriber growth has stalled on its home turf. The 74.4 million accounts it's servicing in the U.S. and Canada is exactly where it was two years ago. If even a modest amount of those bumming paid subscriptions off someone else open their own accounts it could finally move the needle on that front. The downside is that the brand could take a hit -- and overall viewership levels suffer -- if the move backfires. 

There's also the introduction late last year of a cheaper ad-supported tier. The timing seemed iffy at the time with the connected TV advertising market declining given recessionary fears, but it's a win-win right now. Folks bumped from their shared accounts now have a cheaper alternative to continue watching. The digital advertising market could also be turning the corner right now, something that Netflix may or may not confirm as the first streaming video company to report this earnings season.

Then there are the recent Hollywood strikes that have shut down current U.S. productions. Netflix is a hotbed of easily translated international content, so it may not feel the pinch the same way as its more stateside peers. However, it will be interesting to see if the situation will hurt the top line or benefit the bottom line in the near term.

With its rivals losing a lot of money Netflix continues to be the undisputed leader among streaming services stocks. Its performance this week will set the bar for all other industry reports to follow. Everyone's watching Netflix this week, largely because everyone's watching Netflix every week.