Netflix Q3 Report 2023
Revenue in Q3’23 grew 8% year-over-year on a reported and a foreign exchange (F/X) neutral basis . This was slightly above our forecast due to higher-than-expected member growth. Revenue growth in Q3
reflected a 9% year-over-year increase in average paid memberships (8.8M paid net additions vs. 2.4M in Q3’22) due to the roll out of paid sharing, strong, steady programming and the ongoing expansion of
streaming globally. ARM decreased 1% year-over-year both on a reported and F/X neutral basis, in-line with our expectations. This was due to a number of factors, including a higher percentage of membership growth from lower ARM countries, limited price increases over the past 18 months, and some shift in plan mix.
Q3’23 operating income totaled $1.9B vs. $1.5B last year (up 25% year over year), slightly above our
guidance forecast due to the revenue upside and timing of content and other spending. As a result, we
delivered an operating margin of 22.4% (vs 22.2% forecast), up three percentage points vs. the year ago
quarter. EPS in Q3 was $3.73 vs. $3.10 and included a $173M million non-cash unrealized gain from F/X remeasurement on our Euro denominated debt, which is recognized below operating income in “interest and other income.”
Monetization and Growth
In addition to building engagement by creating movies and series that members will love, we’re also
focused on improving monetization through a combination of paid sharing, scaling our ads business and
increased sophistication around our pricing and plans.
First, paid sharing. As our strong membership growth over the past two quarters and our Q4‘23 revenue
growth forecast shows, we’ve now successfully taken action in every region in which we operate and
we’re rolling it out as planned. The cancel reaction continues to be low, exceeding our expectations, and
borrower households converting into full paying memberships are demonstrating healthy retention. As a
result, we’re revenue positive in every region when accounting for additional spin off accounts and extra
members, churn and changes to our plan mix. Going forward, we’ll continue to refine and optimize our
approach to convert additional borrower households into either full paying members or extra members
over the next several quarters.
Second, pricing. While we mostly paused price increases as we rolled out paid sharing, our overall
approach remains the same — a range of prices and plans to meet a wide range of needs, and as we
deliver more value to our members, we occasionally ask them to pay a bit more. Starting today, we’re
adjusting prices in the US, UK and France. In the US, our ads ($6.99) and our Standard plans ($15.49) will stay the same, while Basic will now be $11.99 and Premium $22.99. For the UK and France, our pricing for Ads/Basic/Standard/Premium are UK £4.99/£7.99/£10.99/£17.99 and 5.99€/10.99€/ 13.49€/19.99€, respectively (like the US, our Ads and Standard plans in UK and France are unchanged). Our starting price is extremely competitive with other streamers and at $6.99 per month in the US, for example, it’s much less than the average price of a single movie ticket.