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A Look at Netflix’s Revenue Target for Q3 2018

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Revenue guidance

Netflix (NFLX) expects its third-quarter revenues, including its DVD business, to reach ~$4.0 billion, reflecting 33.6% YoY (year-over-year) growth. The company expects its streaming revenues, which form the bulk of its business, to increase 35.7% YoY to $3.9 billion in the third quarter. In the last five quarters, the company easily outpaced its top-line target.

From the graph above, we can see Netflix’s total revenue growth in the last five quarters. During this period, its revenues grew at a CAGR (compound annual growth rate) of 8.8%. In the second quarter, its overall revenues came in at ~$3.9 billion, up 40.3% YoY.

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International revenue guidance

Netflix (NFLX) expects its third-quarter international streaming revenues to reach ~$2.0 billion, showing annual improvement of 48.5% compared with the third quarter of 2017. The company’s domestic market is becoming highly competitive, alongside video streaming operators such as Hulu, Amazon (AMZN) Prime, PlayStation Vue, and HBO NOW. 

Both Hulu and Amazon Prime offer services at around $8 per month, which is nearly on par with Netflix’s monthly plan. Amazon plans to invest around $5.0 billion on content, up from its 2017 content spending of $4.0 billion. According to Strategy Analytics, the United States ranked first in video streaming penetration of 59.0% in 2017, followed by Canada at 51.0%.

Netflix is gradually targeting international markets such as Europe, Latin America, and Asia. The company is investing in local content such as Brazilian thriller 3%, Narcos: Mexico, and the German-language Dark to attract international subscribers. These investments are paying dividends, as its International segment’s streaming revenues have increased ~50.0% YoY in the last three quarters.

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