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Understanding Netflix (NFLX) Reliance on International Revenue

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Did you analyze how Netflix (NFLX - Free Report) fared in its international operations for the quarter ending March 2024? Given the widespread global presence of this internet video service, scrutinizing the trends in international revenues becomes imperative to assess its financial strength and future growth possibilities.

In the modern, closely-knit global economic landscape, the capacity of a business to access foreign markets is often a key determinant of its financial well-being and growth path. Investors now place great importance on grasping the extent of a company's dependence on international markets, as it sheds light on the firm's earnings stability, its skill in leveraging various economic cycles and its broad growth potential.

Participation in global economies acts as a defense against economic difficulties at home and a pathway to more rapidly developing economies. However, it also comes with the complexities of dealing with fluctuating currencies, geopolitical risks and different market dynamics.

In our recent assessment of NFLX's quarterly performance, we discovered notable trends in its overseas revenue sections, which are typically modeled and scrutinized by Wall Street analysts.

For the quarter, the company's total revenue amounted to $9.37 billion, experiencing an increase of 14.8% year over year. Next, we'll explore the breakdown of NFLX's international revenue to understand the importance of its overseas business operations.

A Closer Look at NFLX's Revenue Streams Abroad

Europe, Middle East and Africa accounted for 31.6% of the company's total revenue during the quarter, translating to $2.96 billion. Revenues from this region represented a surprise of -6.44%, with Wall Street analysts collectively expecting $3.16 billion. When compared to the preceding quarter and the same quarter in the previous year, Europe, Middle East and Africa contributed $2.78 billion (31.5%) and $2.52 billion (30.9%) to the total revenue, respectively.

Asia-Pacific generated $1.02 billion in revenues for the company in the last quarter, constituting 10.9% of the total. This represented a surprise of -2.81% compared to the $1.05 billion projected by Wall Street analysts. Comparatively, in the previous quarter, Asia-Pacific accounted for $962.72 million (10.9%), and in the year-ago quarter, it contributed $933.52 million (11.4%) to the total revenue.

During the quarter, Latin America contributed $1.17 billion in revenue, making up 12.4% of the total revenue. When compared to the consensus estimate of $1.13 billion, this meant a surprise of +3.02%. Looking back, Latin America contributed $1.16 billion, or 13.1%, in the previous quarter, and $1.07 billion, or 13.1%, in the same quarter of the previous year.

International Revenue Predictions

The current fiscal quarter's total revenue for Netflix, as projected by Wall Street analysts, is expected to reach $9.51 billion, reflecting an increase of 16.2% from the same quarter last year. The breakdown of this revenue by foreign region is as follows: Europe, Middle East and Africa is anticipated to contribute 34.1% or $3.24 billion, Asia-Pacific 11.6% or $1.1 billion and Latin America 12.8% or $1.21 billion.

For the full year, a total revenue of $38.57 billion is expected for the company, reflecting an increase of 14.4% from the year before. The revenues from Europe, Middle East and Africa, Asia-Pacific and Latin America are expected to make up 34.2%, 11.6% and 12.7% of this total, corresponding to $13.2 billion, $4.49 billion and $4.9 billion respectively.

Final Thoughts

Relying on international markets for revenues, Netflix faces both prospects and perils. Thus, tracking the company's international revenue trends is essential for accurately projecting its future trajectory.

In an era of growing international ties and escalating geopolitical disputes, financial analysts on Wall Street pay keen attention to these developments to fine-tune their earnings estimations for businesses operating across borders. It's important to note, however, that a range of additional variables, like a company's local market status, also play a crucial role in shaping these forecasts.

Here at Zacks, we put a great deal of emphasis on a company's changing earnings outlook, as empirical research has shown that's a powerful force driving a stock's near-term price performance. Quite naturally, the correlation is positive here -- an upward revision in earnings estimates drives the stock price higher.

Our proprietary stock rating tool, the Zacks Rank, with its externally validated exceptional track record, harnesses the power of earnings estimate revisions to serve as a dependable measure for anticipating the short-term price trends of stocks.

Netflix, bearing a Zacks Rank #3 (Hold), is expected to mirror the broader market's movements in the near term. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Assessing Netflix's Stock Price Movement in Recent Times

Over the preceding four weeks, the stock's value has diminished by 11.6%, against a downturn of 4% in the Zacks S&P 500 composite. In parallel, the Zacks Consumer Discretionary sector, which counts Netflix among its entities, has depreciated by 7.1%. Over the past three months, the company's shares have seen a decline of 2.7% versus the S&P 500's 3% increase. The sector overall has witnessed a decline of 3.5% over the same period.

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