Netflix Half-Year Report 2023

Revenue in Q2 grew 3% year over year (+6% on a foreign exchange (F/X) neutral basis ). Revenue growth was driven by a 6% increase in average paid membership, while ARM declined 3% year over year (-1% F/X neutral). The year-over-year ARM decline was driven by a combination of limited price increases over the past 12 months (leading up to the launch of paid sharing), timing of paid net additions (primarily late in the quarter due to the May 23 rollout of paid sharing in Q2), and a higher mix of membership growth from lower ARM countries.

We had paid net additions of 5.9M for Q2’23 (with over 1M paid net adds in each region) vs. -1.0M in
Q2’22 as we successfully rolled out paid sharing to more than 100 countries (representing over 80% of
our revenue). Q2 operating income totaled $1.8B, up 16% vs. $1.6B in the year ago quarter. Operating
margin was 22%, compared with 20% in Q2’22. Both were slightly ahead of our beginning-of-quarter
forecast due to ongoing expense management, slower-than-projected headcount growth and timing of
content spend. EPS in Q2 amounted to $3.29 vs. $3.20 in Q2’22 and included a $29 million non-cash
unrealized loss from F/X remeasurement on our Euro denominated debt, which is recognized below
operating income in “interest and other income/expense.”

Monetization and Revenue

In addition to delivering an ever-improving slate and product experience, we’ve been working to improve our monetization through initiatives like paid sharing and advertising. This will allow us to generate more revenue off a bigger base, which we can reinvest to make Netflix even better for our members.

Increased sophistication on pricing and plans strategy is important to improved monetization. In Q1, we lowered prices in a number of less penetrated markets, and in Q2, we phased out our Basic ads-free plan for new and rejoining members in Canada (existing members on the Basic ads-free plan are unaffected). We’re now doing the same in the US and the UK. We believe our entry prices in these countries – $6.99 in the US, £4.99 in the UK and $5.99 in Canada – provide great value to consumers given the breadth and quality of our catalog

 

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