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Netflix set for £787m profit surge as investors anticipate subscriber growth

Netflix is poised to report its fourth quarter earnings on Tuesday with investors waiting to see if subscriber growth can hold up. (Photo by Harun Ozalp/Anadolu Agency via Getty Images)
Netflix is poised to report its fourth quarter earnings on Tuesday with investors waiting to see if subscriber growth can hold up. (Photo by Harun Ozalp/Anadolu Agency via Getty Images)

Netflix is poised to report its fourth-quarter earnings on Tuesday with investors waiting to see if subscriber growth can hold up amid a clogged streaming industry.

Analysts are anticipating a full-year operating profit of $6.2bn (£4.9) – a surge of $1bn (£787m) from 2022. This translates to a $1.2bn uptick in the operating profit for the closing quarter.

The streaming giant has projected annual sales for 2023 to hit $33.6bn (£26.4bn), a six per cent increase from the previous year’s $31.6bn (£24.9bn).

Netflix’s subscriber base surged by 8.8m paid users in its third quarter, its best quarter since 2020. This time around, investors will be watching to see whether net subscriber additions stay high and if they are driven by the ad tier, which could increase revenue from advertisers.

However, analysts from AJ Bell have said that the company’s primary focus has shifted from mere subscriber growth to a fuller strategy.

“The streaming wars and cost of content, plus falling share prices, have since persuaded media executives to target growth in revenues, profit and cashflow instead,” they explained in an analyst note.

The huge rise in standalone streaming services, coupled with Netflix’s emphasis on profitability, has led to price hikes.

With customers now weighing multiple streaming options, the once-undisputed appeal of Netflix faces increased scrutiny. Although it has a sturdy market capitalisation of $215bn (£169bn), Netflix is having to work much harder – and spend more on content – to attract and retain customers.

Despite grappling with major share losses in 2022, the Nasdaq-listed stock has mostly recovered.

But the upswing still leaves the share price around 30 per cent below its late 2021 zenith, when pandemic lockdowns confined people to their sofas and interest rates were zero.