Netflix Q2 2022 Earnings Preview: Subscriber Growth, Revenue & Stock Performance Insights

Netflix's global streaming paid subscriber count remains a critical focus as the company prepares to release its Q2 2022 earnings report.

Key Highlights to Watch

• Analysts forecast earnings per share (EPS) of $2.93, slightly down from $2.97 in Q2 2021.
• Global paid streaming memberships are expected to increase year-over-year (YOY), but at the slowest rate in over three years.
• Revenue growth is projected to continue but at a decelerating pace amid intensifying streaming market competition.

Netflix Inc. (NFLX), once known for rapid revenue and profit expansion, now faces significant headwinds. Inflation pressures have constrained consumers' entertainment budgets, supply chain disruptions have impacted smart TV sales, and fierce competition from other streaming platforms is drawing viewers away. To counter slowing growth, Netflix plans to introduce a lower-cost, ad-supported subscription tier later this year—a major shift for a company historically committed to an ad-free experience.

Investors will closely analyze Netflix’s strategy to overcome these challenges when the Q2 FY 2022 earnings are announced on July 19, 2022. Expectations include a second consecutive quarter of year-over-year EPS decline. Revenue is anticipated to grow but at the slowest quarterly pace in at least five years.

Another focal point will be Netflix’s global paid streaming memberships, a key indicator of its monetizable audience. Although the subscriber base surged past 200 million during the pandemic, growth rates have steadily declined over the past two years. Analysts predict Q2 will mark the slowest subscriber growth in several years.

Netflix stock has significantly underperformed the broader market over the past year. After outperforming between August and December 2021, the stock declined sharply following disappointing subscriber forecasts in January 2022 and again after the Q1 FY 2022 report in April. Since then, shares have traded sideways. As of mid-July 2022, Netflix’s one-year total return stands at -65.2%, trailing the S&P 500’s -11.4%.

Netflix’s Earnings and Revenue Trends

Netflix’s EPS experienced an 84.8% increase in FY 2021, fueled by pandemic-driven demand. However, growth has sharply decelerated since. After a 138.9% rise in Q1 FY 2021, EPS growth slowed to 11.8% by Q4 FY 2021, and declined year-over-year in Q1 FY 2022—the first drop since Q4 FY 2020. For Q2, analysts anticipate a further 1.3% EPS decline.

Revenue growth has similarly tapered. From a robust 40.3% increase in Q2 FY 2018, it slowed to 26.0% and 24.9% in Q2 FY 2019 and Q2 FY 2020, respectively. Growth fell below 20% in Q2 FY 2021, and Q2 FY 2022 is expected to show just a 9.4% increase—the weakest in at least five years.

Source: Visible Alpha

Critical Subscriber Metrics

Global paid streaming memberships remain Netflix’s primary revenue driver. However, competition from Apple TV+, Disney+, Amazon Prime Video, and HBO Max has intensified. To attract new subscribers, Netflix is increasing content investment and launching an ad-supported subscription option.

Subscriber growth rate has declined markedly—from 21.9% in FY 2020 to 8.9% in FY 2021. In contrast, FY 2015 saw a 30.0% YOY increase. The 6.7% subscriber growth in Q1 FY 2022 was the lowest in at least four years, with analysts projecting only 5.0% growth for Q2.

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