Netflix Subscriber Numbers Buoyed by ‘Squid Game’

Netflix’s third-quarter earnings are out. Results were buoyed by the company’s blockbuster show, Squid Game. Shares of Netflix were up by as much as 3% before surrendering those gains in the extended-hours market.

So far this year, shares of Netflix have rallied nearly 20%, and investors want to know whether the stock has more gas in the tank left for gains. Competition among content streaming companies has been heating up from the likes of Disney+, HBO Max, AppleTV+ and others.

But if Netflix can keep winning shows like Squid Game coming, then it won’t have too much to worry about, a disappointing Q4 outlook notwithstanding. In addition, the company is making a push into the gaming market, which will further diversify its revenue stream. Netflix can finance its own growth plans and has no need for external financing as it continues to redirect its cash toward expanding.

Glass Half Full

The content streaming giant grew its subscriber numbers in Q3 by 4.38 million to nearly 214 million, surpassing Wall Street estimates. Netflix’s subscriber growth resumed after a bit of a slowdown in the wake of the pandemic-year.

Thanks to the strong performance, fueled largely by Korea’s Squid Game, Netflix forecasts it will add another 8.5 million subscribers in Q4, which again tops analyst expectations. In fact, Netflix said Squid Game’s popularity is “amazing,”  capturing the viewership of more than 140 million member households and rising to the top of the heap in over 90 countries.

Netflix’s operating margin improved to 23.5% thanks to lower than expected spending on marketing and the timing of that spending. The company’s Q3 earnings came in at $1.45 billion, or $3.19 per share, surpassing analyst estimates. Revenue increased by 16% to almost $7.5 billion.

Facebook Bump

When Facebook suffered an outage, users apparently flocked to the content streaming site for entertainment. Netflix said it experienced a 14% pop in engagement while Facebook’s services were down “for several hours” around the world.

Netflix Outlook

Things took a turn for the worse in Netflix’s Q4 outlook. The company forecasts a Q4 operating margin of 6.5%, down from 14% in the year-ago period. The company blames its “backloaded big content release schedule.