Netflix

Netflix just posted 12.25 billion dollars in revenue for the quarter, up 16% from a year ago, while operating income climbed 18% to just under 4 billion dollars. Profit margins hit 32.3%, better than the 31.7% a year earlier. Higher prices, more members, and growing ad money are all landing on the bottom line at once.

Free cash flow came in at 5.1 billion dollars in a single quarter, nearly double the 2.7 billion from a year ago, helped by a 2.8 billion dollar breakup fee after Netflix walked away from buying Warner Bros. The ad business is on pace to hit 3 billion dollars this year, roughly double last year. Netflix also says it has only reached about 45% of the homes it could serve, so there is still room to run.

Netflix expects revenue growth to slow to about 13% next quarter, down from 16% this quarter, and full year growth is guided to 12% to 14%. Profit margins are also expected to dip to 32.6% next quarter versus 34.1% a year ago as content costs land heavier in the first half. Future growth leans more on price hikes, which can push people to cancel.

Earnings per share jumped 86% to 1.23 dollars, but that number was inflated by the 2.8 billion dollar Warner Bros termination fee that will not repeat. Strip it out and profit growth looks much more ordinary. The stock also carries a high beta of 1.5, meaning it swings harder than the market in both directions.