5 Best Q3 Earnings Reports That Crushed Estimates

3. Netflix, Inc. (NASDAQ:NFLX)

Number of Hedge Fund Holders: 114

Netflix, Inc. (NASDAQ:NFLX) crushed EPS and revenue estimates for the third quarter when it disclosed its results in October. Netflix, Inc. (NASDAQ:NFLX)’s GAAP EPS in the quarter came in at $3.73, beating estimates by $0.23. Revenue in the period jumped about 7.7% year over year to $8.54 billion, meeting estimates. In the fourth quarter Netflix, Inc. (NASDAQ:NFLX) expects its revenue to come in at $8.69 billion, above the Street’s estimate of $8.54 billion. Netflix, Inc. (NASDAQ:NFLX)’s new content and its crackdown against password sharing is clearly working as the company saw an uptick in subscribers.

Polen Focus Growth Strategy made the following comment about Netflix, Inc. (NASDAQ:NFLX) in its Q3 2023 investor letter:

“Netflix, Inc. (NASDAQ:NFLX) shares sold off after their CFO Spence Neumann spoke at a conference. He emphasized more than usual that the company’s prior long-term margin guidance, which called for 300+ basis points of operating margin per year on average, is no longer the expectation. We were neither expecting this level of margin expansion (and we do not believe many other investors were either), nor has the company delivered this level of margin expansion over the past two years. It seems market participants took Neumann’s tone on margins as a negative indicator of the company’s earnings momentum.

We believe that Netflix has plenty of room to expand operating margins from year to year, the magnitude of which will depend largely on annual revenue growth. We view Netflix’s share price weakness simply as an unfortunate reaction to the way Neumann communicated his margin views during the conference.

According to our research, Netflix is the only profitable streaming company of any significance in the world. We continue to expect that paid password sharing and ad-supported subscriptions will allow Netflix to be meaningfully larger and more profitable over the next five years than it is now. Future margin expansion will be more modest than in the recent past. Still, we also expect revenue growth to accelerate from monetizing borrowed passwords and advertisers seeking to buy time in Netflix’s high-value content.”