The streaming wars continue to evolve but the clear leader in streaming reports earnings this afternoon. Netflix is expected to showcase its shift from subscriber-focused growth to monetization and profitability. Investors will be keenly watching the company's performance in its advertising-supported tier, its global expansion, and the success of its content slate.

Netflix is expected to report EPS of $6.89, a 28% increase, and revenue around $11.52 billion, up 17% year-over-year. The ad-supported plan is a key growth driver, and its traction with both subscribers and advertisers will be a major highlight of the report.

Netflix’s ad-supported membership tiers were a big surprise to consumers initially, given its popularity for being ad-free, but they have finally begun to show solid growth. A big crackdown on password sharing has also unlocked growth as it has driven revenue with little drag on subscribers. Ad-supported tiers reached 94 million monthly active users as of September, up from 70 million last November as subscribers are seeking low cost alternatives. Importantly, these ad-supported tiers provide a higher-margin revenue stream.

Recent data tracking into the fall season indicate positive feedback from advertisers, with improving rates and yield. Netflix has also rolled out its in-house ad tech stack, which is making it easier for advertisers to buy space.

The company aims for a 31.5% operating margin in 3Q and gross margins are currently above 48%, fueled by higher-margin revenue streams. Investors will evaluate if Netflix can continue to expand its margins despite heavy content and marketing investments.

Even with the recent consolidation, the stock is up considerably year-to-date and expectations are high. Netflix is up 39% this year and is only 6% off its recent all-time high from this summer. The Option market is pricing in a +/- 6.5% move ($81) with volatility elevated going into the report. The clear leader in the streaming space, Netflix will need to show continued growth in its ad-tier offering and expanding growth internationally. An outlier may be clarity on its execution of adding more sporting events. While acquisition costs are elevated, the return on NFL games last Christmas and boxing matches have shown positive impacts.

Tune in live from 8 a.m. to 5 p.m. ET, or anytime, anywhere, on‑demand.

Or stream it via thinkorswim® and thinkorswim Mobile, available through our broker-dealer affiliate, Charles Schwab & Co., Inc

Please do not reply to this email. Replies are not delivered to Schwab Network. For inquiries or comments, please email [email protected].

See how your information is protected with our privacy statement. 

Charles Schwab and all third parties mentioned are separate and unaffiliated, and are not responsible for one another's policies, services or opinions. Schwab Network is brought to you by Charles Schwab Media Productions Company (“CSMPC”). CSMPC is a wholly owned subsidiary of The Charles Schwab Corporation and is not a financial advisor, registered investment advisor, broker-dealer, or futures commission merchant.