Netflix seems to be recovering form previous quarters and reported 2.4 million paid net additions vs 1.0 million forecast in third quarter 2022.

The company reported 6% year-over-year revenue growth in Q3 up to $7.92 bln driven by a 5% increase in average paid memberships
and a 1% rise in Average Revenue per Membership (ARM). Excluding the impact of foreign exchange (F/X), revenue and ARM grew 13% and 8% year-over-year, respectively.

„After a challenging first half, we believe we’re on a path to reaccelerate growth,” the company said in a statement.

In Asia Pacific Region, Netflix added 1.4 million paid memberships while revenue grew 19% as average paid memberships rose 23% year-over-year. ARM was -3% year-over-year, partially driven by lower ARM in India, somewhat offset by higher ARM in Australia and Korea.

For Q3, operating income totaled $1.5 billion vs. $1.8 billion in Q3’21. Operating income was above company’s beginning-of-quarter forecast, partially due to higher revenue, as well as a shift in timing of some spend from Q3 to Q4.

As a result, operating margin of 19% was above 16% forecast. The four percentage point year-over-year decline in operating margin is almost entirely due to the appreciation in the US dollar vs. most other currencies during this period. EPS of $3.10 vs. $3.19 a year ago included a $348 million non-cash unrealized gain from F/X remeasurement on Euro denominated debt.

For Q4’22, Netflix is expecting revenue of $7.8 billion with the sequential decline entirely due to the continued strengthening of the US dollar vs. other currencies.

Revenue growth forecast is driven by expectations for 4.5m paid net adds (vs. 8.3m in Q4’21) and ARM growth of 6% year-over-year.

″Our paid net adds forecast assumes that we experience our usual seasonality as well as the impact of a strong content slate, counterbalanced by macroeconomic weakness which leads to less-than-normal visibility.

While we’re very optimistic about our new advertising business, we don’t expect a material contribution in Q4’22 as we’re launching our Basic with Ads plan intra-quarter and anticipate growing our membership in that plan gradually over time.

Our aim is to give our prospective new members more choice – not switch members off their current plans. Members who don’t want to change will remain on their current plan, without ads, at the current price„.

Netflix forecasts Q4’22 operating margin of 4% vs. 8% in the year ago period, the fourth quarter being typically the lowest operating margin quarter of the year as it’s usually the largest quarter in terms of content and marketing spend.