Netflix said 142 million member households viewed Squid Game in the first four weeks after its release.
Courtesy of Netflix
Netflix shares inched higher in late trading Tuesday after the streaming video giant posted better-than-expected subscriber growth for the September quarter, while projecting further gains in the fourth quarter.
For the quarter, Netflix (ticker: NFLX) added 4.4 million net new subscribers, boosting its global total to 213.6 million. That beat the company’s forecast of 3.5 million. Netflix expects to add another 8.5 million net new subscribers in the September quarter, just ahead of Wall Street’s current forecast of 8.4 million.
Netflix posted third quarter revenue of $7.48 billion, up 16.3% from a year ago and in line with the company’s guidance. Profits were $3.18 a share, well ahead of Wall Street’s consensus estimate of $2.56 a share. Operating margin was 23.5%, up from 20.4% a year ago, but down from 25.2% in the June quarter. The company said free cash flow in the quarter was negative $106 million.
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For the December quarter, Netflix sees revenue of $7.7 billion, up 16.1%, with profits of 80 cents a share, and operating margin shrinking to 6.5% as the company boosts spending on new content. Netflix said it expects to be cash flow breakeven for the full year, with positive cash flow in 2022 and beyond, and that it expects full year 2022 operating margin of 20% or slightly better.
“We’re very excited to finish the year with what we expect to be our strongest Q4 content offering yet, which shows up as bigger content expense and lower operating margins sequentially,” the company said in a letter to shareholders.
Netflix repurchased 200,000 shares in the quarter, for about $100 million, with the buyback pace slowed by its recent M&A activity.
Netflix said revenue growth in the latest quarter was driven by 9% higher paid memberships and 7% higher average revenue per membership, or 5% higher excluding the benefits of foreign currency exchange rates. The subscriber growth in the quarter was driven by 2.2 million net adds in the Asia Pacific region, and 1.8 million in EMEA, or Europe, Middle East and Africa.
Netflix said that Squid Game is now its most watched show ever, with 142 million member households viewing in the first four weeks after its release. Squid Game ranks as the No. 1 show on the service in 94 countries, including the U.S.
The company said that assuming no new waves of Covid, it anticipated “a more normalized content slate in 2022, with a greater number of originals in 2022 vs. 2021 and a release schedule that is more balanced over the course of the year, as compared to 2021.”
Netflix said that in reporting viewership going forward, it plans to focus on hours of viewing, rather than number of households. It also plans to report data on viewership more frequently.
“We think engagement as measured by hours viewed is a slightly better indicator of the overall success of our titles and member satisfaction,” the company said in the letter. “It also matches how outside services measure TV viewing and gives proper credit to rewatching. In addition, we will start to release title metrics more regularly outside of our earnings report so our members and the industry can better measure success in the streaming world.”
The letter includes data on the most watched films and series on Netflix through Sept.27, as measured by the first 28 days after release, and sorted by both accounts and hours viewed. That data was first disclosed at the Code conference last month.
Here are some differences between the two measures: Ranked by number of accounts, the top three shows included Bridgerton Season 1 (at 82 million accounts), Lupin Part 1 (76 million), and The Witcher Season 1 (76 million).
In terms of viewing hours in the first 28 days of release, the most watched programming remains Bridgerton Season 1 (at 625 million hours). But Nos. 2 and 3 are Money Heist Part 4 (619 million hours), and Stranger Things 3 (582 million hours), respectively.