Netflix Full-Year Report 2022

Year over year revenue growth of 2% in Q4 (10% on a foreign exchange (F/X) neutral basis ) was driven by a 4% increase in average paid memberships. ARM declined 2% year over year, but grew 5% on a F/X neutral basis. Revenue was slightly above our beginning-of-quarter projection, as paid net adds of 7.7M
(vs. 8.3M in Q4’21) came in higher than our 4.5M forecast, due to both strong acquisition and retention,
driven primarily by the success of our Q4 content slate. In addition, the US dollar depreciated vs. most
other currencies during the quarter, which resulted in slightly higher than projected ARM.

Operating income of $550M in Q4 was down vs. $632M in Q4 ‘21. This was above our guidance forecast
of $330M primarily due to higher than expected revenue as well as slower-than-forecasted hiring.
Operating margin for Q4 amounted to 7% compared to 8% in Q4’21. This year over year decline was due
to the appreciation of the US dollar. For the full year 2022, our operating margin amounted to 18% vs. 21% in FY21. Based on F/X rates at the beginning of 2022 and excluding the $150M in restructuring
charges in Q2’22, this translates into an operating margin of 20%, at the high end of the 19%-20% target
we set in January of 2022.

EPS in Q4’22 was $0.12 vs. $1.33 in Q4‘21. This was below our $0.36 forecast due to a $462M non-cash
unrealized loss from the F/X remeasurement on our Euro denominated debt as a result of the depreciation of the US dollar vs. the Euro during Q4’22. As a reminder, our approximately $5B of Euro
bonds provides us with some natural hedge on the relative value of the Euro for net income. However, it
doesn’t affect operating income as unrealized gains or losses are recognized below operating income in
“interest and other income.” For the full year, we recognized a non-cash unrealized gain of $353M from
the F/X remeasurement on our Euro bonds.

Product and Pricing

As discussed over the past few quarters, we’re working to give people more choice when it comes to
price as well as greater control over their Netflix account. In November, we successfully launched our
new, lower priced ad-supported plan in 12 countries. We believe branded television advertising is a
substantial long term incremental revenue and profit opportunity for Netflix, and our ability to stand up
this business in six months underscores our commitment both to give members more choice and to
reaccelerate our growth