An impressive set of Netflix (NFLX:NASDAQ) third quarter earnings has helped get the share price moving again as it creates optimism in the market that the company is getting the balance right between growing its subscriber base and delivering profit and cash.

The company’s cash flow was a stand-out feature of the results at $1.89 billion, way above consensus of $1.27 billion.

Netflix has boosted its full-year free cash flow guidance to $6.5 billion. Though this number, up from the prior $5 billion, is inflated somewhat by the industrial action in Tinseltown, which has delayed spending on content.

What did Netflix report

The global streaming giant reported revenue of $8.54 billion for the three months ending 30 September 2023 beating the company’s guidance of $8.52 billion.

Earnings per share (EPS) also beat estimates in the quarter with the company reporting EPS of $3.73, ahead of consensus expectations of $3.49.

The company reported EPS of $3.10 in the same period a year ago.

Netflix’s guidance for fourth quarter revenue of $8.69 billion was slightly below consensus expectations of $8.76 billion.

Ben Barringer, analyst at Quilter Cheviot, says: ‘After a difficult couple of years, Netflix’s turnaround is complete, as its recent efforts to crack down on password sharing and subscribers leaving have paid off. Its latest set of numbers were strong, with subscriptions significantly better than the market was expecting and margins growing too.

‘Indeed, they now guide their sales growth to be back in double-digit growth, and there is no reason that they cannot kick on from here and cement its place at the top of the film and TV hierarchy.’

Subscriber numbers were up which meant that its strategy to crackdown on password sharing has paid off, and global streaming giant has converted ‘non-paying customers’ to paying ones.

Globally, Netflix added nearly 8.8 million subscribers during the July-September period taking its total subscriber base to 247.2 million.

Investors will be looking carefully to see if this can be sustained as price of subscriptions were increased in its core markets in the UK, US and France.

Netflix said its basic and premium plans for US-based customers will now cost $11.99 and $22.99 compared to $9.99 and $19.99 previously. The last time Netflix raised prices was March 2022. Netflix has said further price increases are scheduled in the US from 2024.

If Netflix can continue to ‘keep a lid on its content costs’ and ‘innovating in the sports world, then the global streaming giant’s growth looks set to continue,’ adds Quilter Cheviot’s Barringer.

‘There will come a day where Netflix is showing live sport, but for now it will be more content creating its own leagues and ideas than having to negotiate with the likes of the NFL or Premier League.’

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