Netflix is still making money—
so why is Wall Street starting to worry?
$NFLXB will report its third-quarter results on October 20. Netflix’s second-quarter revenue reached $12.56 billion, up about 13% year over year. But its third-quarter revenue guidance is just $12.86 billion, with growth expected to slow to 11.7%.
What’s more noteworthy is that Netflix expects to generate around $3 billion in ad revenue this year, nearly double last year’s figure. In the past, Netflix relied mainly on subscriber growth to make money. Now, price hikes and advertising are playing increasingly important roles.
However, whether ad revenue growth can offset slowing subscriber growth remains to be seen in the earnings report. In particular, news emerged today that Netflix plans to lay off 6% of its workforce and that its head of content is leaving. The stock fell more than 2% at one point before the market opened.
I remain confident in Netflix’s long-term business model, but revenue growth may no longer be the only question this time around. The actual contribution of the advertising business, and management’s outlook for future growth, may matter more than EPS alone.
$NVDAB $AAPLB
so why is Wall Street starting to worry?
$NFLXB will report its third-quarter results on October 20. Netflix’s second-quarter revenue reached $12.56 billion, up about 13% year over year. But its third-quarter revenue guidance is just $12.86 billion, with growth expected to slow to 11.7%.
What’s more noteworthy is that Netflix expects to generate around $3 billion in ad revenue this year, nearly double last year’s figure. In the past, Netflix relied mainly on subscriber growth to make money. Now, price hikes and advertising are playing increasingly important roles.
However, whether ad revenue growth can offset slowing subscriber growth remains to be seen in the earnings report. In particular, news emerged today that Netflix plans to lay off 6% of its workforce and that its head of content is leaving. The stock fell more than 2% at one point before the market opened.
I remain confident in Netflix’s long-term business model, but revenue growth may no longer be the only question this time around. The actual contribution of the advertising business, and management’s outlook for future growth, may matter more than EPS alone.
$NVDAB $AAPLB