What Investors Need to Know Ahead of Netflix Q4 Earnings

● Netflix is expected to report adjusted earnings per share of $4.19, marking a substantial 98.7% increase from the previous year.

● Revenue forecasts point to $10.12 billion, representing 14.55% year-over-year (YoY) growth. This expansion has been driven by successful content releases and the growing impact of the advertising tier.

Netflix stock rallied more than 80% last year, helped by growth in global paid memberships and higher average revenue per membership (ARM). The company's third quarter (Q3) performance saw 5.1 million net subscriber additions, setting a strong foundation for the fourth quarter (Q4).

Q4 subscriber additions could double the Q3 figure, driven by compelling content including live NFL games and "Squid Game" Season 2. Analysts expect Netflix to report 9.18 million net subscriber additions in the fourth quarter, according to Bloomberg.

However,​the company's decision to stop reporting subscriber metrics after Q4 2024 signals a strategic shift toward emphasizing financial performance metrics.

Source: Bloomberg

Netflix's venture into live sports represents a significant evolution, with successful NFL game streams and the "Tyson vs. Paul" event. Online trading activity has increased around these initiatives.

The platform's 2025 content lineup includes WWE programming and new seasons of hit shows like "Stranger Things" and "Wednesday," which are expected to bolster its subscriber base further. This focus on high-quality, diverse programming positions Netflix as a leader in the competitive streaming market.

Additionally, the company’s advertising business is another exciting growth area. In Q3, over 50% of new sign-ups opted for the ad-supported plan. As Netflix continues to refine its ad offerings, advertising revenue is poised to significantly contribute to its overall financial performance.

In a note to clients, Evercore ISI analyst Mark Mahaney said he expects Netflix to beat expectations for sales and earnings while meeting expectations for its sales outlook.

"While we expect incremental negative FX impact to revenue vs. our assumptions at the time of Netflix's Q3 earnings report on Oct. 17, we continue to view the Street's Q4 Revenue, Operating Margin (21.9%) and earnings-per-share estimates as likely reasonable," Mahaney wrote.

Mahaney and Evercore rate Netflix stock as outperform. In a survey the firm published in December, Evercore found that 58% of Americans said they had watched a movie or show on Netflix in the past year. That topped 54% for Amazon Prime, 44% for Hulu, 40% for YouTube and 28% for HBO Max.

Another factor to watch in 2025 for Netflix is its broader push into live sports. "The notion of more major sports migrating over time to streaming was bolstered by Netflix's solid performance on Christmas Day streaming two NFL games," Rosenblatt Securities analyst Barton Crockett said in a report following the games.

The predicted move after earnings announcement was ±9.6% on average vs an average of the actual earnings moves of 12.2% (in absolute terms). This shows that Netflix tended to be more volatile than the options market predicted for the earnings stock price reaction.

Source: moomoo

From the perspective of options volatility skew, market sentiment is slightly bearish on Netflix.

Source: IBD, Investopedia