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Netflix (NFLX) Q2 2022 earnings results beat EPS expectations with a slight revenue miss

Behind increasing membership fees, Netflix saw a narrow revenue growth, though one that fell short of expectations.

Image: Netflix
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Netflix's (NFLX) rollercoster year continues with its Q2 2022 earnings report. On Tuesday afternoon, the streaming giant reported that its earnings results beat out its EPS expectations, though it slightly missed revenue targets.

Netflix (NFLX) reported an EPS of $3.20, which is up from the $2.97 reported a year ago. It also exceeded the guidance forecast of $3.00, which the company is crediting to a $305 million non-cash unrealized gain from F/X remeasurement on our Euro denominated debt. Netflix notes that its $5 billion invested in Euro bonds helps the company hedge against the Euro for net income, but does not affect its operating income.

Netflix's revenue in Q2 2022 grew by nine percent from last year, reporting in at $7.97 billion USD. The company notes that the increase came largely from an increase in membership fees, but also missed targets mostly because of a weakening dollar. It also notes that it saw substantial growth from the Asia-Pacific market, which grew 23 percent year-over-year.

Netflix earnings Q2 2022
Netflix stock is rising slightly following its Q2 2022 earnings report (Yahoo! Finance)

Here's the Netflix Q3 Forecast, as stated by the Netflix Letter to the Shareholders:

As a reminder, the quarterly guidance we provide is our actual internal forecast at the time we report. As always, we strive for accuracy although the current uncertain macro-economic environment leads to less-than-normal visibility.

The US dollar continues to strengthen meaningfully against most currencies at a historic pace, with the Euro recently falling below the US dollar for the first time in two decades, a significant headwind for all multinational US companies. We have high exposure to this unprecedented appreciation in the USD because nearly 60% of our revenue comes from outside the US and swings in F/X have a large flow through to operating profit as most of our expenses are in USD and don’t benefit from a stronger USD.

Our Q3 revenue growth forecast of 5% translates into 12% year over year revenue growth on a constant currency basis. Similarly, excluding the impact of currency, operating profit growth would be -3% year over year (vs our forecast decline of -29%) and operating margin would be 20% (vs our forecast of 16%). As we have written in the past, over the medium term, we intend to continue to adjust our business as appropriate given the relative strength of the USD to protect our operating margin and try to avoid immediate actions that we believe could be detrimental to the business.

We forecast paid net adds for Q3 of +1.0m vs. 4.4m in the year ago quarter. We continue to expect full year 2022 operating margin of 19%-20%, excluding the unanticipated $150m of restructuring costs in Q2 2 noted above and the material movement in F/X from January 2022, as our guidance was set based on F/X at that time.

We'll have more to say about the Q2 2022 Netflix earnings throughout the day. Keep it on Shacknews for the latest updates.

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Ozzie has been playing video games since picking up his first NES controller at age 5. He has been into games ever since, only briefly stepping away during his college years. But he was pulled back in after spending years in QA circles for both THQ and Activision, mostly spending time helping to push forward the Guitar Hero series at its peak. Ozzie has become a big fan of platformers, puzzle games, shooters, and RPGs, just to name a few genres, but he’s also a huge sucker for anything with a good, compelling narrative behind it. Because what are video games if you can't enjoy a good story with a fresh Cherry Coke?

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