Netflix Q4 2021 Earnings: A Detailed Overview

Netflix surpassed earnings expectations in Q4 2021

Highlights

• Global paid streaming memberships fell short of analyst predictions.
• These memberships are the primary driver of Netflix’s revenue.
• Operating margins declined due to increased content investment aimed at attracting new subscribers.

Source: Analyst consensus data from Visible Alpha

In-Depth Analysis of Netflix (NFLX) Q4 2021 Financial Results

On January 20, 2022, Netflix, Inc. (NFLX) reported a mixed bag of Q4 FY 2021 results. Earnings per share (EPS) rose by 11.8% year-over-year, significantly beating analyst expectations which had anticipated a 31.2% decline. Revenue growth was steady at 16.0% year-over-year, matching forecasts but marking the slowest growth rate in four years. Global paid streaming memberships totaled 221.8 million, missing analyst targets and resulting in a post-market share price drop of up to 15%. Over the past year, Netflix’s stock returned -13.2%, underperforming the S&P 500’s 16.4% total return.

Global Paid Streaming Membership Insights

Netflix’s global paid streaming subscribers grew by 8.9% year-over-year, the second slowest growth pace in over three years. These memberships represent users who pay for Netflix’s streaming services, forming the backbone of the company’s revenue model. Netflix surpassed 200 million paid subscribers at the end of FY 2020, underscoring its global expansion strategy.

However, attracting new subscribers has become increasingly challenging due to fierce competition from Apple TV+, Disney+, Amazon Prime Video, and HBO Max. Netflix acknowledged in its Q4 shareholder letter that intensified competition may be impacting growth rates. To counter this, Netflix increased content spending, which raised costs and led to a decline in operating margins during the quarter.

Beyond streaming video, Netflix is diversifying into interactive entertainment like mobile gaming. In November, it launched mobile games on Android and iOS accessible through the Netflix app globally, with plans to expand its gaming portfolio throughout 2022.

Q1 2022 Outlook

Netflix projects Q1 FY 2022 EPS of $2.86, a 23.7% decline year-over-year. Revenue is expected to grow 10.3% to $7.9 billion, while global paid streaming memberships are forecasted to reach approximately 224.3 million, an 8.0% increase.

Key Takeaways from Netflix’s Earnings Call

Netflix faces the ongoing challenge of reaccelerating subscriber growth to pre-pandemic levels. CEO Reed Hastings noted that COVID-19 introduced significant market noise, downplaying the Q4 subscriber shortfall. Co-CEO Ted Sarandos emphasized stable engagement and retention metrics, affirming the company’s solid fundamentals.

Netflix’s next earnings report for Q1 FY 2022 is expected on April 18, 2022.

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