Netflix Q3 Report 2022
Our 6% year-over-year revenue growth in Q3 was driven by a 5% increase in average paid memberships
and a 1% rise in ARM . Excluding the impact of foreign exchange (F/X), revenue and ARM grew 13% and
8% year-over-year, respectively. The sequential decline in revenue was entirely due to F/X. We under-forecasted paid net additions, which totaled 2.4 million vs. our 1.0m forecast and compared to 4.4m in the year ago quarter.
- In APAC, revenue grew 19% excluding F/X as average paid memberships rose 23% year-over-year.
ARM was -3% year-over-year, excluding F/X, partially driven by lower ARM in India, somewhat
offset by higher ARM in Australia and Korea. We added 1.4m paid memberships in the region (vs.
2.2m last Q3). - Excluding F/X, EMEA revenue and ARM grew 13% and 7%, respectively. Paid net adds totaled
0.6m vs. 1.8m in the year ago quarter. - In LATAM, revenue increased 19% year-over-year, supported by ARM growth of 16% vs. the year
ago quarter excluding F/X. We added 0.3m paid memberships, in-line with membership growth
in Q3’21. - In UCAN, our most penetrated market, ARM and revenue grew by 12% and 11%, respectively,
excluding F/X. Paid net adds totaled 0.1m (similar to the 0.1m in Q3’21).
For Q3, operating income totaled $1.5 billion vs. $1.8 billion in Q3’21. Operating income was above our beginning-of-quarter forecast, partially due to higher revenue, as well as a shift in timing of some spend from Q3 to Q4. As a result, operating margin of 19% was above our 16% forecast. The four percentage point year-over-year decline in operating margin is almost entirely due to the appreciation in the US dollar vs. most other currencies during this period. EPS of $3.10 vs. $3.19 a year ago included a $348 million non-cash unrealized gain from F/X remeasurement on our Euro denominated debt.
Product and Pricing
As we’ve been discussing over the past few quarters, improving our pricing strategy is an important
near-term focus. Last week, we announced that we’ll be launching an ad-supported subscription plan on
November 1 in Canada and Mexico; November 3 in Australia, Brazil, France, Germany, Italy, Japan, Korea, the UK, and the US; and November 10 in Spain. Cumulatively, these 12 markets account for ~$140 billion of brand advertising spend across TV and streaming, or over 75% of the global market .
To start, we’re keeping it simple by offering one low-priced ad plan – Basic with Ads – at a price that’s 20%-40% below our current starting price. So in the US, for example, Netflix will now start at $6.99 per month (compared to $9.99 today). The Basic with Ads plan will have ~5 minutes of advertising per hour, frequency capping and strong privacy protections.
