Yahoo Finance's Jared Blikre joins the Live show to break down Netflix's latest earnings beat and reported subscriber growth.
DAVE BRIGGS: All right, some big earnings news now just coming in-- Netflix shares jumping after hours, up more than 11% on a terrific report. Jared Blikre here with the numbers. Hey, man.
JARED BLIKRE: Hey there. Let's start with the headline number here. Streaming paid net changes-- Street was estimating 1 million, guess what? They came in at 2.41 million for the third quarter. Streaming paid memberships, that total comes to 223.9 million, up 2.5% year-over-year.
Revenue also beating expectations-- that came in at $7.93 billion versus estimates of $7.85 billion-- small beat there. Operating margin 19.3% versus the estimate of 15.9%. So, really, a lot more efficient there than people-- than the Street thought, at least. EPS, earnings per share, coming in at $3.10 for the quarter versus estimates of $2.12-- so huge beat there, lots of concern over not only their expenses, but also their subscribers.
Free cash flow-- here's another one-- ending the quarter at $472 million versus estimates of $184.2 million-- so more than double the expected amount, also coming from a negative number, we'll all recall, from the last quarter. Now, for the current quarter, that is the fourth fiscal quarter, they're seeing streaming paid net change of 4.5 million. The estimate was for 3.9 million-- so better on that front.
Seeing revenue of $7.78 billion that's a little bit lower than estimates of $7.98 billion. EPS, that is expected to be $0.36-- quite a bit lower than the estimate of $1.20. And paid memberships, that total coming to $227.59 million expected versus estimates of $225.7 million-- also seeing operating margin of 4.2%.
Now, starting with the fourth quarter '22 letter in January of next year, so that's coming in at the end of January, we're going to convey-- this as a company-- is going to continue to provide guidance for revenue, operating income, operating margin, net income, EPS, and fully diluted shares outstanding for the following quarter. But no guidance for paid membership, so I think that's an interesting point that's going to get some questions on the call here. Guys.
DAVE BRIGGS: Jared Blikre with the Netflix earnings report. Thank you, my friend. Good to see you. It is an impressive report-- beat on the top, beat on the bottom, and a crush on subs, adding 2.4 million after the first ever back-to-back quarters in which Netflix lost subscribers. There ain't much to not like in this report, especially as we get to the biggest question, which is, how does this add to your impact the stock and help the shares? We now know it's $7 a month. What jumps out to you, Seana?
SEANA SMITH: There isn't much not to like in this report. The one thing I would point out is that Netflix actually coming in a bit light in terms of their fourth quarter revenue guidance. They're expecting $7.78 billion. The estimate out there from the Street was for $7.98 billion.
So that is a miss there. But you're right, Dave-- investors looking beyond that, shareholders really focusing on that subscriber growth number. I think we were all expecting a pretty weak quarter here from Netflix.
We didn't really expect the company to really return to strong growth when it comes to subscribers until the current quarter here when they are launching that ad-supported tier. So 2.41 million new subs during the quarter, Rachelle, very, very strong report here from Netflix. I also wanted to point out that the company did say will not provide pay subscriber forecasts starting in the fourth quarter. So any more information on that, I think, is something that people will want to hear.
Of course, it makes you question just in terms of why they're doing that. I think we can all point to the fact that we are seeing slowing growth. But that is an important tidbit to point out in this report.
RACHELLE AKUFFO: And you mentioned that slowing revenue growth, and they said that it was the result of competition, account sharing, and other factors that they hopefully then now will be addressing by adding this ad tier as well, so that people can pay less, perhaps share passwords. But I mean, this was, I mean, rocketing-- 2.4 million subscribers after we saw all that fuss over-- for the first time when they had their subscriber losses.
And they were like, well, we're not going to be basing it on that anymore because of the competition. I wonder if they'll be changing their tune now that they've got this bumper addition here. So I mean, this beat on the top and the bottom-- really surprising. And it just goes to show Netflix not out of the woods yet. Obviously, a lot of competition in this space still, but Netflix still has a lot of fight-- still investing in some of their big budget productions as well. So a lot to like in this report.
SEANA SMITH: Yeah, again, the new ad-supported tier will debut in November-- $6.99 a month. That, of course, is going to be a key focus on the earnings call that will get underway soon.