Streaming firm Netflix (NFLX:NASDAQ) is set to announce its second-quarter earnings (18 July) with the shares having been buoyed year-to-date by continuing signs the company’s shift in strategy is working.

All the evidence to date suggests the company’s crackdown on password sharing has been a success alongside the introduction of a more affordable ad-supported tier.

It seems the hit Netflix takes on the up-front subscription fee is more than being compensated for by the incremental revenue from advertising. Thus, in the first quarter of 2024 average revenue per membership was up 1% year-on-year and around 4% adjusted for the impact of currency movements.

Given management has identified improving profitability as a key priority, after years of spending heavily on content to establish its leading market position, margin performance is likely to be closely scrutinised by investors. Seasonal effects mean headline earnings and revenue are likely to be lower than for the first quarter.

One worry for the company and the wider industry is data suggesting there has been a deterioration in economic conditions in the US. This could hit consumers' willingness and capacity to stay signed up to streaming platforms in a key market.

Eventually the growth kicker provided by the password-sharing crackdown and expansion of the ad-supported subscription option will play out. This might be why Netflix is dipping its toe into other waters like live sport. 

US UPDATES OVER THE NEXT 7 DAYS

QUARTERLY RESULTS

12 July: JP Morgan, Wells Fargo, Citigroup, Bank of New York Mellon

15 July: Goldman Sachs

16 July: UnitedHealth, Bank of America, Morgan Stanley, Charles Schwab, PNC Financial, State Street, Omnicom 

18 July: Netflix, Abbott Labs, Marsh McLennan, Freeport-McMoran

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