UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20222023
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission File Number: 001-35727
Netflix, Inc.
(Exact name of Registrant as specified in its charter)
Delaware77-0467272
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
100 Winchester Circle,121 Albright Way,Los Gatos,California95032
(Address of principal executive offices)(Zip Code)
(408) 540-3700
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.001 per shareNFLXNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No     
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes      No  
As of September 30, 2022,2023, there were 445,020,494437,679,669 shares of the registrant’s common stock, par value $0.001, outstanding.



Table of Contents
 
Page
Part I. Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II. Other Information
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

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Table of Contents

NETFLIX, INC.
Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)

Three Months EndedNine Months EndedThree Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
RevenuesRevenues$7,925,589 $7,483,467 $23,763,497 $21,988,526 Revenues$8,541,668 $7,925,589 $24,890,472 $23,763,497 
Cost of revenuesCost of revenues4,788,665 4,206,589 13,764,125 12,093,108 Cost of revenues4,930,788 4,788,665 14,407,883 13,764,125 
MarketingMarketing567,954 635,948 1,698,892 1,752,433 Marketing558,736 567,954 1,741,266 1,698,892 
Technology and developmentTechnology and development662,739 563,887 2,037,115 1,626,415 Technology and development657,159 662,739 2,002,417 2,037,115 
General and administrativeGeneral and administrative373,213 321,790 1,180,438 953,831 General and administrative478,591 373,213 1,281,012 1,180,438 
Operating incomeOperating income1,533,018 1,755,253 5,082,927 5,562,739 Operating income1,916,394 1,533,018 5,457,894 5,082,927 
Other income (expense):Other income (expense):Other income (expense):
Interest expenseInterest expense(172,575)(190,429)(535,609)(576,191)Interest expense(175,563)(172,575)(524,614)(535,609)
Interest and other incomeInterest and other income261,404 96,135 677,275 302,702 Interest and other income168,218 261,404 123,975 677,275 
Income before income taxesIncome before income taxes1,621,847 1,660,959 5,224,593 5,289,250 Income before income taxes1,909,049 1,621,847 5,057,255 5,224,593 
Provision for income taxesProvision for income taxes(223,605)(211,888)(787,953)(780,451)Provision for income taxes(231,627)(223,605)(587,103)(787,953)
Net incomeNet income$1,398,242 $1,449,071 $4,436,640 $4,508,799 Net income$1,677,422 $1,398,242 $4,470,152 $4,436,640 
Earnings per share:Earnings per share:Earnings per share:
BasicBasic$3.14 $3.27 $9.98 $10.18 Basic$3.80 $3.14 $10.08 $9.98 
DilutedDiluted$3.10 $3.19 $9.83 $9.90 Diluted$3.73 $3.10 $9.90 $9.83 
Weighted-average shares of common stock outstanding:Weighted-average shares of common stock outstanding:Weighted-average shares of common stock outstanding:
BasicBasic444,878 442,778 444,529 443,052 Basic441,537 444,878 443,540 444,529 
DilutedDiluted450,344 454,925 451,168 455,230 Diluted450,011 450,344 451,319 451,168 










See accompanying notes to the consolidated financial statements.
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NETFLIX, INC.
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Net incomeNet income$1,398,242 $1,449,071 $4,436,640 $4,508,799 Net income$1,677,422 $1,398,242 $4,470,152 $4,436,640 
Other comprehensive loss:
Other comprehensive income (loss):Other comprehensive income (loss):
Foreign currency translation adjustments
Foreign currency translation adjustments
(103,167)(29,610)(207,148)(64,233)
Foreign currency translation adjustments
(94,157)(103,167)(16,117)(207,148)
Cash flow hedges:Cash flow hedges:
Net unrealized gains (losses), net of tax effect of $(23) million, $0, $(23) million, and $0, respectivelyNet unrealized gains (losses), net of tax effect of $(23) million, $0, $(23) million, and $0, respectively77,852 — 77,852 — 
Total other comprehensive income (loss)Total other comprehensive income (loss)(16,305)(103,167)61,735 (207,148)
Comprehensive incomeComprehensive income$1,295,075 $1,419,461 $4,229,492 $4,444,566 Comprehensive income$1,661,117 $1,295,075 $4,531,887 $4,229,492 
























See accompanying notes to the consolidated financial statements.
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NETFLIX, INC.

Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months EndedNine Months Ended
Three Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net incomeNet income$1,398,242 $1,449,071 $4,436,640 $4,508,799 Net income$1,677,422 $1,398,242 $4,470,152 $4,436,640 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Additions to content assetsAdditions to content assets(4,582,671)(4,666,237)(12,853,846)(12,047,563)Additions to content assets(2,883,839)(4,582,671)(9,025,512)(12,853,846)
Change in content liabilitiesChange in content liabilities60,867 (29,246)(95,054)(607,494)Change in content liabilities(325,989)60,867 (634,661)(95,054)
Amortization of content assetsAmortization of content assets3,653,592 2,963,051 10,081,305 8,489,050 Amortization of content assets3,573,353 3,653,592 10,443,358 10,081,305 
Depreciation and amortization of property, equipment and intangiblesDepreciation and amortization of property, equipment and intangibles85,188 70,253 243,295 144,428 Depreciation and amortization of property, equipment and intangibles90,660 85,188 270,380 243,295 
Stock-based compensation expenseStock-based compensation expense152,062 95,078 421,663 303,891 Stock-based compensation expense79,720 152,062 256,849 421,663 
Foreign currency remeasurement gain on debtForeign currency remeasurement gain on debt(348,458)(136,488)(814,792)(326,744)Foreign currency remeasurement gain on debt(172,678)(348,458)(63,075)(814,792)
Other non-cash itemsOther non-cash items102,513 102,211 409,855 282,971 Other non-cash items115,688 102,513 357,179 409,855 
Deferred income taxesDeferred income taxes(57,797)50,967 (242,523)261,827 Deferred income taxes(86,277)(57,797)(288,231)(242,523)
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Other current assetsOther current assets(120,071)(95,145)44,485 (369,073)Other current assets103,766 (120,071)(167,805)44,485 
Accounts payableAccounts payable53,875 24,836 (283,617)(40,164)Accounts payable(68,390)53,875 (119,726)(283,617)
Accrued expenses and other liabilitiesAccrued expenses and other liabilities212,072 269,774 324,116 276,241 Accrued expenses and other liabilities(65,029)212,072 298,101 324,116 
Deferred revenueDeferred revenue(48,420)(4,732)(42,053)64,640 Deferred revenue(5,733)(48,420)41,524 (42,053)
Other non-current assets and liabilitiesOther non-current assets and liabilities(4,184)(11,014)(47,075)(144,925)Other non-current assets and liabilities(40,359)(4,184)(227,246)(47,075)
Net cash provided by operating activitiesNet cash provided by operating activities556,810 82,379 1,582,399 795,884 Net cash provided by operating activities1,992,315 556,810 5,611,287 1,582,399 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Purchases of property and equipmentPurchases of property and equipment(84,960)(167,327)(296,136)(358,606)Purchases of property and equipment(103,929)(84,960)(266,920)(296,136)
Change in other assets— (21,304)— (26,919)
AcquisitionsAcquisitions— — (193,397)— Acquisitions— — — (193,397)
Net cash used in investing activities(84,960)(188,631)(489,533)(385,525)
Purchases of short-term investmentsPurchases of short-term investments— — (504,862)— 
Proceeds from maturities of short-term investmentsProceeds from maturities of short-term investments400,000 — 901,937 — 
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities296,071 (84,960)130,155 (489,533)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Repayments of debtRepayments of debt— — (700,000)(500,000)Repayments of debt— — — (700,000)
Proceeds from issuance of common stockProceeds from issuance of common stock4,113 18,445 29,041 86,265 Proceeds from issuance of common stock57,818 4,113 118,563 29,041 
Repurchases of common stockRepurchases of common stock— (100,000)— (600,022)Repurchases of common stock(2,500,100)— (3,545,347)— 
Other financing activitiesOther financing activities(32,826)— (71,746)— 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities4,113 (81,555)(670,959)(1,013,757)Net cash provided by (used in) financing activities(2,475,108)4,113 (3,498,530)(670,959)
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash(180,058)(63,843)(336,704)(82,504)Effect of exchange rate changes on cash, cash equivalents and restricted cash(122,707)(180,058)(56,658)(336,704)
Net increase (decrease) in cash, cash equivalents and restricted cashNet increase (decrease) in cash, cash equivalents and restricted cash295,905 (251,650)85,203 (685,902)Net increase (decrease) in cash, cash equivalents and restricted cash(309,429)295,905 2,186,254 85,203 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period5,844,409 7,804,618 6,055,111 8,238,870 Cash, cash equivalents and restricted cash at beginning of period7,666,265 5,844,409 5,170,582 6,055,111 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$6,140,314 $7,552,968 $6,140,314 $7,552,968 Cash, cash equivalents and restricted cash at end of period$7,356,836 $6,140,314 $7,356,836 $6,140,314 
See accompanying notes to the consolidated financial statements.
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NETFLIX, INC.
Consolidated Balance Sheets
(in thousands, except share and par value data)

As ofAs of
September 30,
2022
December 31,
2021
September 30,
2023
December 31,
2022
(unaudited)(unaudited)
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$6,113,733 $6,027,804 Cash and cash equivalents$7,353,245 $5,147,176 
Short-term investmentsShort-term investments514,201 911,276 
Other current assetsOther current assets2,703,170 2,042,021 Other current assets2,912,028 3,208,021 
Total current assetsTotal current assets8,816,903 8,069,825 Total current assets10,779,474 9,266,473 
Content assets, netContent assets, net32,777,340 30,919,539 Content assets, net31,749,861 32,736,713 
Property and equipment, netProperty and equipment, net1,372,754 1,323,453 Property and equipment, net1,498,391 1,398,257 
Other non-current assetsOther non-current assets4,595,190 4,271,846 Other non-current assets5,474,060 5,193,325 
Total assetsTotal assets$47,562,187 $44,584,663 Total assets$49,501,786 $48,594,768 
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Current liabilities:Current liabilities:Current liabilities:
Current content liabilitiesCurrent content liabilities$4,225,890 $4,292,967 Current content liabilities$4,259,582 $4,480,150 
Accounts payableAccounts payable560,156 837,483 Accounts payable534,429 671,513 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities1,803,555 1,449,351 Accrued expenses and other liabilities1,838,908 1,514,650 
Deferred revenueDeferred revenue1,176,323 1,209,342 Deferred revenue1,306,185 1,264,661 
Short-term debtShort-term debt— 699,823 Short-term debt399,614 — 
Total current liabilitiesTotal current liabilities7,765,924 8,488,966 Total current liabilities8,338,718 7,930,974 
Non-current content liabilitiesNon-current content liabilities2,955,368 3,094,213 Non-current content liabilities2,668,472 3,081,277 
Long-term debtLong-term debt13,888,117 14,693,072 Long-term debt13,900,754 14,353,076 
Other non-current liabilitiesOther non-current liabilities2,424,637 2,459,164 Other non-current liabilities2,486,215 2,452,040 
Total liabilitiesTotal liabilities27,034,046 28,735,415 Total liabilities27,394,159 27,817,367 
Commitments and contingencies (Note 7)
Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Common stock, $0.001 par value; 4,990,000,000 shares authorized at September 30, 2022 and December 31, 2021; 445,020,494 and 443,963,107 issued and outstanding at September 30, 2022 and December 31, 2021, respectively4,473,962 4,024,561 
Treasury stock at cost (1,564,478 shares at September 30, 2022)(824,190)(824,190)
Common stock, $0.001 par value; 4,990,000,000 shares authorized at September 30, 2023 and December 31, 2022; 437,679,669 and 445,346,776 issued and outstanding at September 30, 2023 and December 31, 2022, respectivelyCommon stock, $0.001 par value; 4,990,000,000 shares authorized at September 30, 2023 and December 31, 2022; 437,679,669 and 445,346,776 issued and outstanding at September 30, 2023 and December 31, 2022, respectively5,011,427 4,637,601 
Treasury stock at cost (10,600,660 and 1,564,478 shares at September 30, 2023 and December 31, 2022, respectively)Treasury stock at cost (10,600,660 and 1,564,478 shares at September 30, 2023 and December 31, 2022, respectively)(4,399,677)(824,190)
Accumulated other comprehensive lossAccumulated other comprehensive loss(247,643)(40,495)Accumulated other comprehensive loss(155,571)(217,306)
Retained earningsRetained earnings17,126,012 12,689,372 Retained earnings21,651,448 17,181,296 
Total stockholders’ equityTotal stockholders’ equity20,528,141 15,849,248 Total stockholders’ equity22,107,627 20,777,401 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$47,562,187 $44,584,663 Total liabilities and stockholders’ equity$49,501,786 $48,594,768 




See accompanying notes to the consolidated financial statements.
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NETFLIX, INC.
Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands)
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Total stockholders' equity, beginning balancesTotal stockholders' equity, beginning balances$19,075,974 $13,863,871 $15,849,248 $11,065,240 Total stockholders' equity, beginning balances$22,832,215 $19,075,974 $20,777,401 $15,849,248 
Common stock and additional paid-in capital:Common stock and additional paid-in capital:Common stock and additional paid-in capital:
Beginning balancesBeginning balances$4,316,870 $3,721,246 $4,024,561 $3,447,698 Beginning balances$4,874,208 $4,316,870 $4,637,601 $4,024,561 
Issuance of common stock upon exercise of optionsIssuance of common stock upon exercise of options5,030 36,207 27,738 100,942 Issuance of common stock upon exercise of options57,499 5,030 116,977 27,738 
Stock-based compensation expenseStock-based compensation expense152,062 95,078 421,663 303,891 Stock-based compensation expense79,720 152,062 256,849 421,663 
Ending balancesEnding balances$4,473,962 $3,852,531 $4,473,962 $3,852,531 Ending balances$5,011,427 $4,473,962 $5,011,427 $4,473,962 
Treasury stock:Treasury stock:Treasury stock:
Beginning balancesBeginning balances$(824,190)$(500,022)$(824,190)$— Beginning balances$(1,876,753)$(824,190)$(824,190)$(824,190)
Repurchases of common stock to be held as treasury stockRepurchases of common stock to be held as treasury stock— (100,000)— (600,022)Repurchases of common stock to be held as treasury stock(2,522,924)— (3,575,487)— 
Ending balancesEnding balances$(824,190)$(600,022)$(824,190)$(600,022)Ending balances$(4,399,677)$(824,190)$(4,399,677)$(824,190)
Accumulated other comprehensive loss
Accumulated other comprehensive loss:Accumulated other comprehensive loss:
Beginning balancesBeginning balances$(144,476)$9,775 $(40,495)$44,398 Beginning balances$(139,266)$(144,476)$(217,306)$(40,495)
Other comprehensive loss(103,167)(29,610)(207,148)(64,233)
Other comprehensive income (loss)Other comprehensive income (loss)(16,305)(103,167)61,735 (207,148)
Ending balancesEnding balances$(247,643)$(19,835)$(247,643)$(19,835)Ending balances$(155,571)$(247,643)$(155,571)$(247,643)
Retained earnings:Retained earnings:Retained earnings:
Beginning balancesBeginning balances$15,727,770 $10,632,872 $12,689,372 $7,573,144 Beginning balances$19,974,026 $15,727,770 $17,181,296 $12,689,372 
Net incomeNet income1,398,242 1,449,071 4,436,640 4,508,799 Net income1,677,422 1,398,242 4,470,152 4,436,640 
Ending balancesEnding balances$17,126,012 $12,081,943 $17,126,012 $12,081,943 Ending balances$21,651,448 $17,126,012 $21,651,448 $17,126,012 
Total stockholders' equity, ending balancesTotal stockholders' equity, ending balances$20,528,141 $15,314,617 $20,528,141 $15,314,617 Total stockholders' equity, ending balances$22,107,627 $20,528,141 $22,107,627 $20,528,141 





















See accompanying notes to the consolidated financial statements.
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NETFLIX, INC.
Notes to Consolidated Financial Statements
(unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying interim consolidated financial statements of Netflix, Inc. and its wholly owned subsidiaries (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States (“U.S.”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 filed with the Securities and Exchange Commission (the “SEC”) on January 27, 2022.26, 2023. The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the amortization of content asset amortization policyassets and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On a regular basis, the Company evaluates the assumptions, judgments and estimates. Actual results may differ from these estimates.
The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. Interim results are not necessarily indicative of the results for a full year.
There have been no material changes inThe following is provided to update the Company’s significant accounting policies as compared to the significant accounting policiespreviously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.

Recently adopted accounting pronouncementsDerivative Financial Instruments
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.
The Company adopted ASU 2021-08uses derivative instruments to manage foreign exchange risk related to its ongoing business operations with the primary objective of reducing operating income and cash flow volatility associated with fluctuations in foreign exchange rates.
The Company enters into forward contracts to manage the foreign exchange risk on forecasted revenue transactions denominated in currencies other than the U.S. dollar, as well as the foreign exchange risk on forecasted transactions and firm commitments related to the licensing and production of foreign currency-denominated content assets. These forward contracts are designated as cash flow hedges of foreign currency firm commitments and forecasted transactions and generally have maturities of 24 months or less. The hedging contracts may reduce, but do not entirely eliminate, the effect of foreign currency exchange movements, and the Company may choose not to hedge certain exposures.
The Company recognizes derivative instruments at fair value as either assets (presented in “Other current assets” and “Other non-current assets”) or liabilities (presented in “Accrued expenses and other liabilities'' and “Other non-current liabilities”) on the Company’s Consolidated Balance Sheets. The Company classifies derivative instruments in the first quarterLevel 2 category within the fair value hierarchy.
The gain or loss on derivative instruments designated as cash flow hedges of 2022forecasted foreign currency revenue is initially reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into “Revenues” on the adoption had no material impactConsolidated Statements of Operations in the same period the forecasted transaction affects earnings. The gain or loss on derivative instruments designated as cash flow hedges of firmly committed or forecasted transactions related to the Company’slicensing and production of content assets is initially reported as a component of AOCI and reclassified into “Cost of Revenues” on the Consolidated Statements of Operations in the same period the hedged transaction affects earnings, which occurs as the underlying hedged content assets are amortized. Cash flows from hedging activities are classified in the same category as the cash flows for the underlying item being hedged within "Net cash provided by (used in) operating activities" on the Consolidated Statements of Cash Flows.
In the event that the likelihood of occurrence of the underlying forecasted transactions is determined to be probable not to occur, the gains or losses on the related cash flow hedges are reclassified from AOCI to “Interest and other income (expense)” in the Consolidated Statements of Operations in the period of dedesignation.
See Note 7 Derivative Financial Instruments to the consolidated financial statements.statements for further information regarding the Company’s derivative financial instruments.


2. Revenue Recognition
The Company's primary source of revenues is from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. The Company is the principal in all its relationships where partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators and internet
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service providers (“ISPs”), provide access to the service as the Company retains control over service delivery to its members. Typically, payments made to the partners, such as for marketing, are expensed. However, if there is no distinct service provided in exchange for the payments made to the partners or if the price that the member pays is established by the partners and there is no standalone price for the Netflix service (for instance, in a bundle), these payments are recognized as a reduction of revenues.
The Company also earns revenue from advertisements presented on its streaming service, consumer products and various other sources. Revenues earned from sources other than monthly membership fees were not material for the three and nine months ended September 30, 2023 and September 30, 2022.
The following tables summarize streaming revenues, paid net membership additions (losses), and ending paid memberships at end of period by region for the three and nine months ended September 30, 20222023 and 2021,September 30, 2022, respectively:

United States and Canada (UCAN)
As of/ Three Months EndedAs of/ Nine Months EndedAs of/ Three Months EndedAs of/ Nine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands) (in thousands)
RevenuesRevenues$3,601,565 $3,257,697 $10,489,852 $9,663,312 Revenues$3,735,133 $3,601,565 $10,943,226 $10,489,852 
Paid net membership additions (losses)Paid net membership additions (losses)104 73 (1,828)88 Paid net membership additions (losses)1,750 104 3,025 (1,828)
Paid memberships at end of period (1)Paid memberships at end of period (1)73,387 74,024 73,387 74,024 Paid memberships at end of period (1)77,321 73,387 77,321 73,387 

Europe, Middle East, and Africa (EMEA)
As of/ Three Months EndedAs of/ Nine Months Ended
 September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
 (in thousands)
Revenues$2,693,146 $2,375,814 $7,772,957 $7,394,880 
Paid net membership additions (losses)3,953 568 7,031 (502)
Paid memberships at end of period (1)83,760 73,534 83,760 73,534 

Latin America (LATAM)
As of/ Three Months EndedAs of/ Nine Months Ended
 September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
 (in thousands)
Revenues$1,142,811 $1,023,945 $3,290,438 $3,053,127 
Paid net membership additions (losses)1,179 312 1,946 (25)
Paid memberships at end of period (1)43,645 39,936 43,645 39,936 

Asia-Pacific (APAC)
As of/ Three Months EndedAs of/ Nine Months Ended
 September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
 (in thousands)
Revenues$948,216 $889,037 $2,801,012 $2,713,510 
Paid net membership additions (losses)1,881 1,429 4,404 3,596 
Paid memberships at end of period (1)42,427 36,228 42,427 36,228 
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Europe, Middle East, and Africa (EMEA)
As of/ Three Months EndedAs of/ Nine Months Ended
 September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
 (in thousands)
Revenues$2,375,814 $2,432,239 $7,394,880 $7,176,393 
Paid net membership additions (losses)568 1,804 (502)3,802 
Paid memberships at end of period (1)73,534 70,500 73,534 70,500 

Latin America (LATAM)
As of/ Three Months EndedAs of/ Nine Months Ended
 September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
 (in thousands)
Revenues$1,023,945 $915,297 $3,053,127 $2,612,826 
Paid net membership additions (losses)312 330 (25)1,451 
Paid memberships at end of period (1)39,936 38,988 39,936 38,988 

Asia-Pacific (APAC)
As of/ Three Months EndedAs of/ Nine Months Ended
 September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
 (in thousands)
Revenues$889,037 $834,002 $2,713,510 $2,395,896 
Paid net membership additions1,429 2,176 3,596 4,559 
Paid memberships at end of period (1)36,228 30,051 36,228 30,051 
(1) A paid membership (also referred to as a paid subscription) is defined as a membership that has the right to receive Netflix service following sign-up and a method of payment being provided, and that is not part of a free trial or certain other promotions that may be offered by the Company to new or rejoining members. Certain members have the option to add extra member sub accounts. These extra member sub accounts are not included in paid memberships. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations generally become effective at the end of the prepaid membership period. Involuntary cancellations, as a result of a failed method of payment, become effective immediately. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company’s internal systems, which utilize industry standard geo-location technology.
Total U.S. revenues, inclusive of DVD revenues not reported in the tables above, were $3.5 billion and $10.1 billion, respectively, for the three and nine months ended September 30, 2023 and $3.3 billion and $9.7 billion, respectively, for the three and nine months ended September 30, 20222022. DVD revenues were $22 million and $3.0 billion and $9.0 billion,$83 million, respectively, for the three and nine months ended September 30, 2021. DVD revenues were2023 and $35 million and $112 million, respectively, for the three and nine months ended September 30, 2022 and $44 million and $140 million, respectively, for three and nine months ended September 30, 2021.2022.
Deferred revenue consists of membership fees billed that have not been recognized, as well as gift cards and other prepaid memberships that have not been fully redeemed. As of September 30, 2022,2023, total deferred revenue was $1,176$1,306 million, the vast majority of which was related to membership fees billed that are expected to be recognized as revenue within the next month. The remaining deferred revenue balance, which is related to gift cards and other prepaid memberships, will be recognized as revenue over the period of service after redemption, which is expected to occur over the next 12 months. The $33$42 million decreaseincrease in deferred revenue as compared to the balance of $1,209$1,265 million as of December 31, 20212022 is primarilya result of the increase in membership fees billed due to a decrease in the purchase of gift cards, partially offset by an increase in average monthly revenue per paying member.increased memberships.

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3. Earnings Per Share

Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential outstanding shares of common stock during the period. Potential shares of common stock consist of incremental shares issuable upon the assumed exercise of stock options. The computation of earnings per share is as follows:
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except per share data)(in thousands, except per share data)
Basic earnings per share:Basic earnings per share:Basic earnings per share:
Net incomeNet income$1,398,242 $1,449,071 $4,436,640 $4,508,799 Net income$1,677,422 $1,398,242 $4,470,152 $4,436,640 
Shares used in computation:Shares used in computation:Shares used in computation:
Weighted-average shares of common stock outstandingWeighted-average shares of common stock outstanding444,878 442,778 444,529 443,052 Weighted-average shares of common stock outstanding441,537 444,878 443,540 444,529 
Basic earnings per shareBasic earnings per share$3.14 $3.27 $9.98 $10.18 Basic earnings per share$3.80 $3.14 $10.08 $9.98 
Diluted earnings per share:Diluted earnings per share:Diluted earnings per share:
Net incomeNet income$1,398,242 $1,449,071 $4,436,640 $4,508,799 Net income$1,677,422 $1,398,242 $4,470,152 $4,436,640 
Shares used in computation:Shares used in computation:Shares used in computation:
Weighted-average shares of common stock outstandingWeighted-average shares of common stock outstanding444,878 442,778 444,529 443,052 Weighted-average shares of common stock outstanding441,537 444,878 443,540 444,529 
Employee stock optionsEmployee stock options5,466 12,147 6,639 12,178 Employee stock options8,474 5,466 7,779 6,639 
Weighted-average number of sharesWeighted-average number of shares450,344 454,925 451,168 455,230 Weighted-average number of shares450,011 450,344 451,319 451,168 
Diluted earnings per shareDiluted earnings per share$3.10 $3.19 $9.83 $9.90 Diluted earnings per share$3.73 $3.10 $9.90 $9.83 

Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation as their inclusion would have been anti-dilutive. The following table summarizes the potential shares of common stock excluded from the diluted calculation:
Three Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
(in thousands)
Employee stock options8,536 279 6,487 441 
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)
Employee stock options3,147 8,536 4,447 6,487 
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4. Cash, Cash Equivalents, and Restricted Cash, and Short-term Investments

The Company’s investment policy is consistent with the definition of available-for-sale securities. The Company does not buy and hold securities principally for the purpose of selling them in the near future. The Company’s policy is focused on the preservation of capital, liquidity and return. From time to time, the Company may sell certain securities but the objectives are generally not to generate profits on short-term differences in price. The following tables summarize the Company's cash, cash equivalents, and restricted cash and short-term investments as of September 30, 20222023 and December 31, 2021:2022:

As of September 30, 2022 As of September 30, 2023
Cash and cash equivalentsOther Current AssetsNon-current AssetsTotal Cash and cash equivalentsShort-term investmentsOther Current AssetsNon-current AssetsTotal
(in thousands) (in thousands)
CashCash$5,363,669 $2,819 $23,641 $5,390,129 Cash$5,241,192 $— $1,933 $1,604 $5,244,729 
Level 1 securities:Level 1 securities:Level 1 securities:
Money market fundsMoney market funds750,064 — 121 750,185 Money market funds1,592,131 — — 54 1,592,185 
Level 2 securities:Level 2 securities:
Time Deposits (1)Time Deposits (1)519,922 514,201 — — 1,034,123 
$6,113,733 $2,819 $23,762 $6,140,314 $7,353,245 $514,201 $1,933 $1,658 $7,871,037 

 As of December 31, 2021
 Cash and cash equivalentsOther Current AssetsNon-current AssetsTotal
 (in thousands)
Cash$4,103,613 $3,189 $23,972 $4,130,774 
Level 1 securities:
Money market funds1,924,191 — 146 1,924,337 
$6,027,804 $3,189 $24,118 $6,055,111 

 As of December 31, 2022
 Cash and cash equivalentsShort-term investmentsOther Current AssetsNon-current AssetsTotal
 (in thousands)
Cash$4,071,584 $— $3,410 $19,874 $4,094,868 
Level 1 securities:
Money market funds569,826 — — 122 569,948 
Level 2 securities:
Time Deposits (1)505,766 911,276 — — 1,417,042 
$5,147,176 $911,276 $3,410 $19,996 $6,081,858 
(1) The majority of the Company's time deposits are domestic deposits, which mature within one year.
Other current assets include restricted cash for deposits related to self insurance.insurance and letter of credit agreements. Non-current assets include restricted cash related to letter of credit agreements. The fair value of cash equivalents and short-term investments included in the Level 2 category is based on observable inputs, such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly.
See Note 6 Debt to the consolidated financial statements for further information regarding the fair value of the Company’s senior notes.
There were no material gross realized gains or losses in the three and nine months ended September 30, 2023 and 2022, or 2021.respectively.

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5. Balance Sheet Components

Content Assets, Net
Content assets consisted of the following:
As ofAs of
September 30,
2022
December 31,
2021
September 30,
2023
December 31,
2022
(in thousands)(in thousands)
Licensed content, netLicensed content, net$12,571,064 $13,799,221 Licensed content, net$12,459,413 $12,732,549 
Produced content, netProduced content, netProduced content, net
Released, less amortizationReleased, less amortization7,936,197 6,877,743 Released, less amortization9,433,878 9,110,518 
In productionIn production11,484,835 9,235,975 In production9,052,140 10,255,940 
In development and pre-productionIn development and pre-production785,244 1,006,600 In development and pre-production804,430 637,706 
20,206,276 17,120,318 19,290,448 20,004,164 



Content assets, netContent assets, net$32,777,340 $30,919,539 Content assets, net$31,749,861 $32,736,713 

As of September 30, 2022,2023, approximately $5,500$5,575 million, $2,836$2,812 million, and $1,865$1,888 million of the $12,571$12,459 million unamortized cost of the licensed content is expected to be amortized in each of the next three years, respectively.years.  As of September 30, 2022,2023, approximately $3,131
11


$3,594 million, $2,058$2,493 million, and $1,363$1,744 million of the $7,936$9,434 million unamortized cost of the produced content that has been released is expected to be amortized in each of the next three years, respectively.years.
As of September 30, 2022,2023, the amount of accrued participations and residuals was not material.
The following tables represent the amortization of content assets:
Three Months EndedThree Months Ended
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
(in thousands)(in thousands)
Licensed contentLicensed content$1,967,720 $1,965,514 Licensed content$1,777,701 $1,967,720 
Produced contentProduced content1,685,872 997,537 Produced content1,795,652 1,685,872 
TotalTotal$3,653,592 $2,963,051 Total$3,573,353 $3,653,592 

Nine Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
(in thousands)(in thousands)
Licensed contentLicensed content$5,751,940 $5,679,398 Licensed content$5,280,700 $5,751,940 
Produced contentProduced content4,329,365 2,809,652 Produced content5,162,658 4,329,365 
TotalTotal$10,081,305 $8,489,050 Total$10,443,358 $10,081,305 


13


Property and Equipment, Net
Property and equipment and accumulated depreciation consisted of the following:
As ofAs of
September 30,
2022
December 31,
2021
Estimated Useful LivesSeptember 30,
2023
December 31,
2022
Estimated Useful Lives
(in thousands)(in thousands)
LandLand$84,726 $82,381 Land$86,662 $85,005 
BuildingsBuildings50,026 48,123 30 yearsBuildings104,593 52,106 30 years
Leasehold improvementsLeasehold improvements1,037,193 863,342 Over life of leaseLeasehold improvements1,053,681 1,040,570 Over life of lease
Furniture and fixturesFurniture and fixtures154,980 139,809 3 yearsFurniture and fixtures155,184 153,682 3 years
Information technologyInformation technology427,223 380,452 3 yearsInformation technology462,303 442,681 3 years
Corporate aircraftCorporate aircraft110,978 110,978 8 yearsCorporate aircraft133,998 115,578 8-10 years
Machinery and equipmentMachinery and equipment27,277 32,426 3-5 yearsMachinery and equipment27,362 26,821 3-5 years
Capital work-in-progressCapital work-in-progress190,373 282,248 Capital work-in-progress377,299 235,555 
Property and equipment, grossProperty and equipment, gross2,082,776 1,939,759 Property and equipment, gross2,401,082 2,151,998 
Less: Accumulated depreciationLess: Accumulated depreciation(710,022)(616,306)Less: Accumulated depreciation(902,691)(753,741)
Property and equipment, netProperty and equipment, net$1,372,754 $1,323,453 Property and equipment, net$1,498,391 $1,398,257 


Leases
The Company has entered into operating leases primarily for real estate. Operating leases are included in "Other non-current assets" on the Company's Consolidated Balance Sheets, and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligations to make lease payments are included in "Accrued expenses and other liabilities" and "Other non-current liabilities" on the Company's Consolidated Balance Sheets. The Company has also entered into various short-term operating leases, primarily for marketing billboards, with an initial term of twelve months or less. These leases are not recorded on the Company's Consolidated Balance Sheets. All operating lease expense is recognized on a straight-line basis over the lease term. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.
Information related to the Company's operating right-of-use assets and related operating lease liabilities were as follows:
Three Months Ended
September 30,
2023
September 30,
2022
(in thousands)
Cash paid for operating lease liabilities$110,959 $105,848 
Right-of-use assets obtained in exchange for new operating lease obligations49,238 2,938 

Nine Months Ended
September 30,
2023
September 30,
2022
(in thousands)
Cash paid for operating lease liabilities$339,126 $308,747 
Right-of-use assets obtained in exchange for new operating lease obligations161,704 183,540 
As of
September 30,
2023
December 31,
2022
(in thousands)
Operating lease right-of-use assets, net$2,124,501 $2,227,122 
Current operating lease liabilities377,400 355,985 
Non-current operating lease liabilities2,086,480 2,222,503 
Total operating lease liabilities$2,463,880 $2,578,488 

12
14


Three Months Ended
September 30,
2022
September 30,
2021
(in thousands)
Cash paid for operating lease liabilities$105,848 $89,916 
Right-of-use assets obtained in exchange for new operating lease obligations2,938 252,377 

Nine Months Ended
September 30, 2022September 30, 2021
(in thousands)
Cash paid for operating lease liabilities$308,747 $251,827 
Right-of-use assets obtained in exchange for new operating lease obligations183,540 485,173 
As of
September 30,
2022
December 31,
2021
(in thousands)
Operating lease right-of-use assets, net$2,211,507 $2,446,573 
Current operating lease liabilities334,339 315,189 
Non-current operating lease liabilities2,209,725 2,408,486 
Total operating lease liabilities$2,544,064 $2,723,675 

Other Current Assets
Other current assets consisted of the following:
As of
September 30,
2022
December 31,
2021
(in thousands)
Trade receivables$875,042 $804,320 
Prepaid expenses391,832 323,818 
Other1,436,296 913,883 
Total other current assets$2,703,170 $2,042,021 

As of
September 30,
2023
December 31,
2022
(in thousands)
Trade receivables$1,139,974 $988,898 
Prepaid expenses482,375 392,735 
Other1,289,679 1,826,388 
Total other current assets$2,912,028 $3,208,021 
The increasedecrease in Other was primarily driven by receipt of amounts due tounder a modification of amodified content licensing arrangement.
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6. Debt
As of September 30, 2022,2023, the Company had aggregate outstanding notes of $13,888$14,300 million, net of $82$68 million of issuance costs, with varying maturities (the "Notes"). Of the outstanding balance, $400 million, net of issuance costs, is classified as short-term debt on the Consolidated Balance Sheets. As of December 31, 2021,2022, the Company had aggregate outstanding notes of $15,393$14,353 million, net of $92$79 million of issuance costs. Each of the Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at fixed rates. A portion of the outstanding Notes is denominated in foreign currency (comprised of €5,170 million) and is remeasured into U.S. dollars at each balance sheet date (with remeasurement gain totaling $348$173 million and $815$63 million, respectively, for the three and nine months ended September 30, 2022)2023).
The following table provides a summary of the Company's outstanding debt and the fair values based on quoted market prices in less active markets as of September 30, 20222023 and December 31, 2021:2022:
Principal Amount at ParLevel 2 Fair Value as ofPrincipal Amount at ParLevel 2 Fair Value as of
September 30,
2022
December 31,
2021
Issuance DateMaturitySeptember 30,
2022
December 31,
2021
September 30,
2023
December 31,
2022
Issuance DateMaturitySeptember 30,
2023
December 31,
2022
(in millions)(in millions)(in millions)(in millions)
5.500% Senior Notes— 700 February 2015February 2022— 704 
5.750% Senior Notes5.750% Senior Notes400 400 February 2014March 2024407 437 5.750% Senior Notes$400 $400 February 2014March 2024$400 $404 
5.875% Senior Notes5.875% Senior Notes800 800 February 2015February 2025805 899 5.875% Senior Notes800 800 February 2015February 2025799 811 
3.000% Senior Notes (1)3.000% Senior Notes (1)460 535 April 2020June 2025447 581 3.000% Senior Notes (1)497 503 April 2020June 2025489 495 
3.625% Senior Notes3.625% Senior Notes500 500 April 2020June 2025473 529 3.625% Senior Notes500 500 April 2020June 2025482 479 
4.375% Senior Notes4.375% Senior Notes1,000 1,000 October 2016November 2026948 1,111 4.375% Senior Notes1,000 1,000 October 2016November 2026965 980 
3.625% Senior Notes (1)3.625% Senior Notes (1)1,275 1,480 May 2017May 20271,206 1,702 3.625% Senior Notes (1)1,375 1,391 May 2017May 20271,347 1,338 
4.875% Senior Notes4.875% Senior Notes1,600 1,600 October 2017April 20281,501 1,829 4.875% Senior Notes1,600 1,600 October 2017April 20281,552 1,557 
5.875% Senior Notes5.875% Senior Notes1,900 1,900 April 2018November 20281,847 2,293 5.875% Senior Notes1,900 1,900 April 2018November 20281,919 1,930 
4.625% Senior Notes (1)4.625% Senior Notes (1)1,079 1,252 October 2018May 20291,011 1,565 4.625% Senior Notes (1)1,163 1,177 October 2018May 20291,175 1,151 
6.375% Senior Notes6.375% Senior Notes800 800 October 2018May 2029798 999 6.375% Senior Notes800 800 October 2018May 2029827 830 
3.875% Senior Notes (1)3.875% Senior Notes (1)1,177 1,366 April 2019November 20291,041 1,651 3.875% Senior Notes (1)1,269 1,284 April 2019November 20291,233 1,201 
5.375% Senior Notes5.375% Senior Notes900 900 April 2019November 2029850 1,068 5.375% Senior Notes900 900 April 2019November 2029879 885 
3.625% Senior Notes (1)3.625% Senior Notes (1)1,079 1,252 October 2019June 2030927 1,493 3.625% Senior Notes (1)1,164 1,177 October 2019June 20301,106 1,078 
4.875% Senior Notes4.875% Senior Notes1,000 1,000 October 2019June 2030914 1,169 4.875% Senior Notes1,000 1,000 October 2019June 2030946 944 
$13,970 $15,485 $13,175 $18,030 $14,368 $14,432 $14,119 $14,083 
(1) The following Senior Notes have a principal amount denominated in euro: 3.000% Senior Notes for €470 million, 3.625% Senior Notes for €1,300 million, 4.625% Senior Notes for €1,100 million, 3.875% Senior Notes for €1,200 million, and 3.625% Senior Notes for €1,100 million.
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In February 2022, the Company repaid upon maturity the $700 million aggregate principal amount of its 5.500% Senior Notes.

Each of the Notes are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to 101% of the principal plus accrued interest. The Company may redeem the Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest and an applicable premium. The Notes include, among other terms and conditions, limitations on the Company's ability to create, incur or allow certain liens; enter into sale and lease-back transactions; create, assume, incur or guarantee additional indebtedness of certain of the Company's subsidiaries; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's and its subsidiaries assets, to another person. As of September 30, 20222023 and December 31, 2021,2022, the Company was in compliance with all related covenants.
Revolving Credit Facility
On June 17, 2021,March 6, 2023, the Company amended its $1 billion unsecured revolving credit facility ("Revolving Credit Agreement") to replace the London interbank offered rate to a variable secured overnight financing rate (the “Term SOFR Rate”) as the rate to which interest payments are indexed, among other things, extend the maturity date from March 29, 2024 tothings. The Revolving Credit Agreement matures on June 17, 2026 and to increase the size of the facility from $750 million to $1 billion.2026. Revolving loans may be borrowed, repaid and reborrowed until June 17, 2026, at which time all amounts borrowed must be repaid. The Company may use the proceeds of future borrowings under the Revolving Credit Agreement for working capital and general corporate purposes. As of September 30, 2022,2023, no amounts have been borrowed under the Revolving Credit Agreement.
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BorrowingsThe borrowings under the Revolving Credit Agreement bear interest, at the Company’s option, of either (i) a floating rate equal to a base rate (the “Alternate Base Rate”) or (ii) a rate equal to an adjusted London interbank offered rate (the “Adjusted LIBO Rate”)the Term SOFR Rate (or the applicable benchmark replacement), plus a margin of 0.75%. The Alternate Base Rate is defined as the greatest of (A) the rate of interest published by the Wall Street Journal, from time to time, as the prime rate, (B) the federal funds rate, plus 0.500% and (C) the Adjusted LIBOTerm SOFR Rate for a one-month interest period,tenor, plus 1.00%. The Adjusted LIBOTerm SOFR Rate is defined as the London interbank offered rate for deposits in U.S. dollars, for the relevant interest period, adjusted for statutory reserve requirements, but in no event shall the Adjusted LIBO Rate be less than 0.00% per annum. Regulatory authorities that oversee financial markets have announced that publication of the Adjusted LIBO Rate based upon U.S. Dollars is expected to cease on June 30, 2023. The Revolving Credit Agreement contains customary provisions for the replacement of the Adjusted LIBO Rate with an alternate benchmark rate, including a rate based on theforward-looking secured overnight financing rate publishedadministered by the Federal Reserve Bank of New York asor a successor administrator, for the Adjusted LIBOrelevant interest period, but in no event shall the Term SOFR Rate is phased out in the lending market. The Company does not anticipate that the replacement of the Adjusted LIBO Rate with such alternative benchmark rate, as provided in the Revolving Credit Agreement, will materially impact its liquidity or financial position.be less than 0.00% per annum.
The Company is also obligated to pay a commitment fee on the undrawn amounts of the Revolving Credit Agreement at an annual rate of 0.10%. The Revolving Credit Agreement requires the Company to comply with certain covenants, including covenants that limit or restrict the ability of the Company’s subsidiaries to incur debt and limit or restrict the ability of the Company and its subsidiaries to grant liens and enter into sale and leaseback transactions; and, in the case of the Company or a guarantor, merge, consolidate, liquidate, dissolve or sell, transfer, lease or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole. As of September 30, 20222023 and December 31, 2021,2022, the Company was in compliance with all related covenants.


7. Derivative Financial Instruments
In the third quarter of 2023, the Company began using derivative financial instruments to manage foreign exchange risk related to its ongoing business operations with the primary objective of reducing operating income and cash flow volatility associated with fluctuations in foreign exchange rates. The Company did not use any derivative instruments prior to the third quarter of 2023.

Notional Amount of Derivative Contracts
The net notional amounts of the Company’s outstanding derivative instruments were as follows:
As of 
September 30,
2023
December 31,
2022
(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts
Cash flow hedges$3,571,367 $— 
Total$3,571,367 $— 
Fair Value of Derivative Contracts
The fair value of the Company’s outstanding derivative instruments were as follows:

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 As of September 30, 2023
Derivative AssetsDerivative Liabilities
 Other current assetsOther non-current assetsAccrued expenses and other liabilitiesOther non-current liabilities
 (in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts$74,541 $35,182 $6,525 $2,029 
Total$74,541 $35,182 $6,525 $2,029 
The Company classifies derivative instruments in the Level 2 category within the fair value hierarchy. These instruments are valued using industry standard valuation models that use observable inputs such as interest rate yield curves, and forward and spot prices for currencies.
As of September 30, 2023, the pre-tax net accumulated gain on our foreign currency cash flow hedges included in AOCI on the Consolidated Balance Sheets expected to be recognized in earnings within the next 12 months is $74 million.
Master Netting Agreements
In order to mitigate counterparty credit risk, the Company enters into master netting agreements with its counterparties for its foreign currency exchange contracts which permit the parties to settle amounts on a net basis under certain conditions. The Company has elected to present its derivative assets and liabilities on a gross basis on its Consolidated Balance Sheets.
The Company also enters into collateral security arrangements with its counterparties that require the parties to post cash collateral when certain contractual thresholds are met. No cash collateral was received or posted by the Company as of September 30, 2023.
The potential offsetting effect to the Company’s derivative assets and liabilities under its master netting agreements and collateral security agreements were as follows:

 As of September 30, 2023
Gross Amount Not Offset in the Consolidated Balance Sheets
 Gross Amount Recognized in the Consolidated Balance SheetsGross Amount Offset in the Consolidated Balance SheetsNet Amount Presented in the Consolidated Balance SheetsFinancial InstrumentsCollateral Received and PostedNet Amount
 (in thousands)
Derivative assets$109,723 $— $109,723 $(8,463)$— $101,260 
Derivative liabilities8,554 — 8,554 (8,463)— 91 

Effect of Derivative Instruments on Consolidated Financial Statements
The pre-tax gains (losses) on the Company’s cash flow hedges recognized in AOCI were as follows:
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)
Cash flow hedges:
Foreign exchange contracts (1)
Amount included in the assessment of effectiveness$101,169 $— $101,169 $— 
Total$101,169 $— $101,169 $— 
(1) No amounts were excluded from the assessment of effectiveness.
No gains or losses on derivative instruments were reclassified from AOCI into the Consolidated Statements of Operations in the three and nine months ended September 30, 2023.

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8. Commitments and Contingencies

Content
As of September 30, 2022,2023, the Company had $21.6$19.7 billion of obligations comprised of $4.2$4.3 billion included in "Current content liabilities" and $3.0$2.7 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $14.4$12.7 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not yet meet the criteria for asset recognition.
As of December 31, 2021,2022, the Company had $23.2$21.8 billion of obligations comprised of $4.3$4.5 billion included in "Current content liabilities" and $3.1 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $15.8$14.2 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not yet meet the criteria for asset recognition.
The expected timing of payments for these content obligations is as follows:
As of As of 
September 30,
2022
December 31,
2021
September 30,
2023
December 31,
2022
(in thousands)(in thousands)
Less than one yearLess than one year$9,667,326 $10,019,306 Less than one year$9,512,081 $10,038,483 
Due after one year and through three yearsDue after one year and through three years8,961,147 9,238,315 Due after one year and through three years8,470,469 9,425,551 
Due after three years and through five yearsDue after three years and through five years2,639,608 3,238,977 Due after three years and through five years1,449,676 2,124,307 
Due after five yearsDue after five years304,664 664,762 Due after five years217,823 243,606 
Total content obligationsTotal content obligations$21,572,745 $23,161,360 Total content obligations$19,650,049 $21,831,947 
Content obligations include amounts related to the acquisition, licensing and production of content. Obligations that are in non-U.S. dollar currencies are translated to the U.S. dollar at period end rates. An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements as well as other production related commitments. An obligation for the acquisition and licensing of content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is recorded on the Consolidated Balance Sheets. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. Traditional film output deals, or certain TV series license agreements where the number of seasons to be aired is unknown, are examples of such license agreements. The Company does not include any estimated obligation for these future titles beyond the known minimum amount. However, the unknown obligations are expected to be significant.
Legal Proceedings
From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims, including claims relating to employee relations, business practices and patent infringement. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company's view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An
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unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company's operations or its financial position, liquidity or results of operations.
The Company is involved in litigation matters not listed herein but does not consider the matters to be material either individually or in the aggregate at this time. The Company's view of the matters not listed may change in the future as the litigation and events related thereto unfold.
Indemnification
In the ordinary course of business, the Company has entered into contractual arrangements under which it has agreed to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements and out of intellectual property infringement claims made by third parties. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract.
The Company's obligations under these agreements may be limited in terms of time or amount, and in some instances, the Company may have recourse against third parties for certain payments. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations vary.
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It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. No amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification obligations.


8.9. Stockholders’ Equity
Stock Option Plan
In June 2020, the Company's stockholders approved the 2020 Stock Plan, which was adopted by the Company’s Board of Directors in March 2020 subject to stockholder approval. The 2020 Stock Plan is the successor to the 2011 Stock Plan and provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants.
A summary of the activities related to the Company’s stock option plans is as follows:
Options OutstandingOptions Outstanding
Shares
Available
for Grant
Number of
Shares
Weighted-
Average
Exercise Price
(per share)
Shares
Available
for Grant
Number of
Shares
Weighted-
Average
Exercise Price
(per share)
Weighted-Average
Remaining
Contractual Term
(in years)
Aggregate Intrinsic Value
(in thousands)
Balances as of December 31, 202120,145,360 17,595,851 $219.83 
Balances as of December 31, 2022Balances as of December 31, 202216,454,103 19,896,861 $242.22 
GrantedGranted(2,812,627)2,812,627 265.11Granted(1,372,702)1,372,702 360.44
ExercisedExercised— (1,057,387)26.26 Exercised— (1,369,075)85.43 
ExpiredExpired— (4,871)11.35 Expired— (3,314)32.04 
Balances as of September 30, 202217,332,733 19,346,220 $237.05 
Balances as of September 30, 2023Balances as of September 30, 202315,081,401 19,897,174 $261.20 5.41$2,780,062 
Vested and expected to vest as of September 30, 2023Vested and expected to vest as of September 30, 202319,897,174 $261.20 5.41$2,780,062 
Exercisable as of September 30, 2023Exercisable as of September 30, 202319,709,179 $260.11 5.37$2,775,752 

The aggregate intrinsic value ofin the Company's outstanding stock options as of September 30, 2022 was $1,329 million andtable above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of 20222023 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of the third quarter of 2022.2023. This amount changes based on the fair market value of the Company’s common stock. The weighted-average remaining contractual term of the Company's outstanding stock options as of September 30, 2022 included in the table above was 5.58 years. All options outstanding are vested and exercisable.
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A summary of the amounts related to option exercises, is as follows:
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)(in thousands)
Total intrinsic value of options exercisedTotal intrinsic value of options exercised$65,087 $263,507 $262,879 $581,817 Total intrinsic value of options exercised$160,031 $65,087 $414,132 $262,879 
Cash received from options exercisedCash received from options exercised4,113 18,445 29,041 86,265 Cash received from options exercised57,818 4,113 118,563 29,041 
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Stock-based Compensation
Stock options granted are generally vested in full upon grant date and exercisable for the full ten year contractual term regardless of employment status. Stock options granted to certain named executive officers vest on the one-year anniversary of the grant date, subject to the employee’s continuous employment or service with the Company through the vesting date. The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:
Three Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Dividend yield— %— %— %— %
Expected volatility50 %34 %38% - 50%34% - 41%
Risk-free interest rate2.98 %1.37 %1.71% - 2.98%1.08% - 1.62%
Suboptimal exercise factor4.73 3.85 4.71 - 4.733.81 - 3.85
Weighted-average fair value (per share)$127 $240 $150 $250 
Total stock-based compensation expense (in thousands)$152,062 $95,078 $421,663 $303,891 
Total income tax impact on provision (in thousands)$33,724 $21,443 $93,472 $68,354 

The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior.
The Company calculates expected volatility based solely on implied volatility. The Company believes that implied volatility of publicly traded options in its common stock is more reflective of market conditions, and given consistently high trade volumes of the options, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock.
In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date.
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Dividend yield— %— %— %— %
Expected volatility40 %50 %40% - 46%38% - 50%
Risk-free interest rate3.95 %2.98 %3.57% - 3.95%1.71% - 2.98%
Suboptimal exercise factor4.27 4.73 4.22 - 4.274.71 - 4.73
Weighted-average fair value (per share)$244 $127 $205 $150 
Total stock-based compensation expense (in thousands)$79,720 $152,062 $256,849 $421,663 
Total income tax impact on provision (in thousands)$17,452 $33,724 $56,311 $93,472 
Stock Repurchases
In March 2021, the Company’s Board of Directors authorized the repurchase of up to $5 billion of its common stock, with no expiration date, and in September 2023, the Board of Directors increased the share repurchase authorization by an additional $10 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. The Company is not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price, general economic, business and market conditions, and alternative investment opportunities. The Company may discontinue any repurchases of its common stock at any time without prior notice. There were no repurchases duringDuring the three and nine months ended September 30, 2022.2023, the Company repurchased 5,964,802 and 9,036,182 shares, respectively, for an aggregate amount of $2,500 million and $3,545 million, respectively. As of September 30, 2022, $4.42023, $10.9 billion remain available for repurchases. Shares repurchased by the Company are accounted for when the transaction is settled. As of September 30, 2022,2023, there were no unsettled share repurchases. Direct costs incurred to acquire the shares are included in the total cost of the shares.
Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax:
Foreign Currency Translation
Adjustments
Change in Unrealized Gains (Losses) on Cash Flow HedgesTotal
(in thousands)
Balances as of December 31, 2022$(217,306)$— $(217,306)
Other comprehensive income (loss) before reclassifications(16,117)77,852 61,735 
Balances as of September 30, 2023$(233,423)$77,852 $(155,571)
Foreign Currency Translation
Adjustments
Change in Unrealized Gains (Losses) on Cash Flow HedgesTotal
(in thousands)
Balances as of December 31, 2021$(40,495)$— $(40,495)
Other comprehensive income (loss) before reclassifications(207,148)— (207,148)
Balances as of September 30, 2022$(247,643)$— $(247,643)

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9.10. Income Taxes
Three Months EndedNine Months Ended Three Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except percentages) (in thousands, except percentages)
Provision for income taxesProvision for income taxes$223,605 $211,888 $787,953 $780,451 Provision for income taxes$231,627 $223,605 $587,103 $787,953 
Effective tax rateEffective tax rate14 %13 %15 %15 %Effective tax rate12 %14 %12 %15 %
The effective tax raterates for the three and nine months ended September 30, 2023 and 2022, differed from the Federal statutory rate primarily due to the impact of international provisions of the Tax Cuts and Jobs Act, the Federalresearch and California Research and Development (“R&D”)development credits, and the recognition of excess tax benefits of stock-based compensation.
The effective tax rate fordecrease in the nine months ended September 30, 2022 differed from the Federal statutory rate primarily due to an increase in foreign taxes, offset by the impact of international provisions of the Tax Cuts and Jobs Act, the Federal and California R&D credits, and the recognition of excess tax benefits of stock-based compensation. The effective tax rates for the three and nine months ended September 30, 2021 differed from2023, as compared to the Federal statutory ratesame period in 2022 was primarily due to the impact of international provisions offoreign taxes and the Tax Cuts and Jobs Act and recognition of excess tax benefits of stock-based compensation.
The increase in the effective tax rate for the three months ended September 30, 2022, as compared to the same period in 2021 was primarily due to a reduction in excess tax benefits of stock-based compensation. The effective tax rate for the nine months ended September 30, 2022 was consistent compared to the same period in 2021. For the three and nine months ended September 30, 2022,2023, the Company recognized a discrete tax benefit related to the excess tax benefits from stock-based compensation of $14$28 million and $57$80 million, respectively, compared to the three and nine months ended September 30, 20212022 of $57$14 million and $123 million, respectively.$57 million.
Gross unrecognized tax benefits were $230$213 million and $203$227 million as of September 30, 20222023 and December 31, 2021,2022, respectively. The gross unrecognized tax benefits as of September 30, 2022,2023, if recognized by the Company, will result in a reduction of approximately $152$134 million to the provision for income taxes thereby favorably impacting the Company’s effective tax rate.
The Company files U.S. Federal, state and foreign tax returns. The Company is currently under examination by the IRS for the years 2016 through 2018 and is subject to examination for 2019 through 2021.2022. The foreign and state tax returns for the years 20152016 through 20212022 are subject to examination by various states and foreign jurisdictions. While the Company is in various stages of inquiries and examinations by federal, state and foreign taxing authorities, we believe that our tax positions will more likely than not be sustained. Nonetheless, it is possible that future obligations related to these matters could arise.
Given the potential outcome of the current examination,examinations as well as the impact of the current examinationexaminations on the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months. However, an estimate of the range of reasonably possible adjustments cannot be made at this time.


10.11. Segment and Geographic Information

The Company operates as one operating segment. The Company's chief operating decision maker ("CODM") areis its co-chief executive officers, who review financial information presented on a consolidated basis for the purposes of making operating decisions, assessing financial performance and allocating resources.
Total U.S. revenues were $3.5 billion and $10.1 billion, respectively, for the three and nine months ended September 30, 2023, and $3.3 billion and $9.7 billion, respectively, for the three and nine months ended September 30, 2022, and $3.0 billion and $9.0 billion, respectively, for the three and nine months ended September 30, 2021.2022. See Note 2 Revenue Recognition for additional information about streaming revenue by region.
The Company's long-lived tangible assets, as well as the Company's operating lease right-of-use assets recognized on the Consolidated Balance Sheets as of September 30, 20222023 and December 31, 2021,2022, were located as follows:
As of
September 30,
2022
December 31,
2021
(in thousands)
United States$2,785,303 $2,833,059 
International798,958 936,967 


11. Subsequent Event

On October 3, 2022, the Company completed the acquisition of Animal Logic, an Australian animation studio. The Company anticipates accounting for the transaction as a business combination.
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As of
September 30,
2023
December 31,
2022
(in thousands)
United States$2,799,543 $2,745,071 
International823,349 880,308 



Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding: our core strategy; our ability to improve our content offerings and service; our future financial performance, including expectations regarding revenues, deferred revenue, operating income and margin, net income, expenses, and profitability; liquidity, including the sufficiency of our capital resources, adequacy of existing facilities, net cash provided by (used in) operating
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activities, access to financing sources, and free cash flows; capital allocation strategies, including any stock repurchases or repurchase programs; seasonality; thestock price volatility; impact of foreign exchange rate fluctuations, including on net income, revenues and average revenues per paying member; impact of interest rate fluctuations; the impactadequacy of the discontinuance of the LIBO Rate;existing facilities; future regulatory changes and their impact on our business; intellectual property; price changes and testing; impact of recently adopted accounting pronouncements; accounting treatment for changes related to content assets andassets; acquisitions; membership growth, including impact of content and pricing changes on membership growth; partnerships; member viewing patterns; dividends; future contractual obligations, including unknown content obligations and timing of payments; our global content and marketing investments, including investments in original programming; impact of work stoppages; content amortization; resolution of tax examinations; tax expense; unrecognized tax benefits; deferred tax assets; and our ability to effectively manage change and growth; and the impact of the coronavirus (COVID-19) pandemic and our response to it.growth. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 20212022 filed with the Securities and Exchange Commission (“SEC”) on January 27, 2022,26, 2023, in particular the risk factors discussed under the heading “Risk Factors” in Part I, Item IA.1A. 
We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law.
Investors and others should note that we announce material financial information to our investors using our investor relations website (ir.netflix.net), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media and blogs to communicate with our members and the public about our company, our services and other issues. It is possible that the information we post on social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels and blogs listed on our investor relations website.


Overview
We are one of the world’s leading entertainment services with approximately 223over 247 million paid memberships in over 190 countries enjoying TV series, documentaries, feature films and mobile games across a wide variety of genres and languages. Members can engageplay, pause and resume watching as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume to watch, anytime, anywhere, and can change their plans at any time. Additionally, we continue to offer our DVD-by-mail service in the United States (“U.S.”).
We are a pioneer in the delivery of streaming entertainment, launching our streaming service in 2007. Since this launch, we have developed an ecosystem for internet-connected screens and continue to add content that enables consumers to enjoy entertainment directly on their internet-connected screens. As a result of these efforts, we have experienced growing consumer acceptance of, and interest in, the delivery of streaming entertainment.
Our core strategy is to grow our streaming business globally within the parameters of our operating margin target. We arestrive to continuously improvingimprove our members’ experience by expanding our content with a focus on a programming mix ofoffering compelling content that delights our membersthem and attracts new members. For example, in 2021 we added mobile gamesWe seek to drive conversation around our service. In addition,content to further enhance member joy, and we are continuously enhancing our user interface and extending our streaming service to more internet-connected screens. Certain ofhelp our members can download a selection of titles for offline viewing.more easily choose content that they will find enjoyable.
Our membership growth exhibits a seasonal pattern that reflects variations when consumers buy internet-connected screens and when they tend to increase their viewing. Historically, the fourth quarter represents our greatest streaming membership growth. In addition, our membership growth can be impacted by our content release schedule and changes to pricing.


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Results of Operations

The following represents our consolidated performance highlights:
As of/ Three Months EndedChangeAs of/ Three Months EndedChange
September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except revenue per membership and percentages)(in thousands, except revenue per membership and percentages)
Financial Results:Financial Results:Financial Results:
Streaming revenuesStreaming revenues$7,890,361 $7,439,235 $451,126 %Streaming revenues$8,519,306 $7,890,361 $628,945 %
DVD revenues(1)DVD revenues(1)35,228 44,232 (9,004)(20)%DVD revenues(1)22,362 35,228 (12,866)(37)%
Total revenuesTotal revenues$7,925,589 $7,483,467 $442,122 %Total revenues$8,541,668 $7,925,589 $616,079 %
Operating incomeOperating income1,533,018 1,755,253 $(222,235)(13)%Operating income$1,916,394 $1,533,018 $383,376 25 %
Operating marginOperating margin19 %23 %(4)%Operating margin22 %19 %%
Global Streaming Memberships:Global Streaming Memberships:Global Streaming Memberships:
Paid net membership additionsPaid net membership additions2,413 4,383 (1,970)(45)%Paid net membership additions8,763 2,413 6,350 263 %
Paid memberships at end of periodPaid memberships at end of period223,085 213,563 9,522 %Paid memberships at end of period247,153 223,085 24,068 11 %
Average paying membershipsAverage paying memberships221,879 211,372 10,507 %Average paying memberships242,772 221,879 20,893 %
Average monthly revenue per paying membershipAverage monthly revenue per paying membership$11.85 $11.73 $0.12 %Average monthly revenue per paying membership$11.70 $11.85 $(0.15)(1)%

(1) In April 2023, we announced our plans to discontinue our DVD-by-mail service, and we ceased providing our mailing services to customers on September 29, 2023. The discontinuance of our DVD business had an immaterial impact on our operations and financial results.
Consolidated revenues for the three months ended September 30, 20222023 increased 6%8% as compared to the three months ended September 30, 2021 due to2022. Operating margin for the 5% growth in average paying memberships and a 1% increase in average monthly revenue per paying membership. The increase in average monthly revenue per paying membership resulted from our price changes, partially offset by the strengthening of the U.S. dollar relative to certain foreign currencies.
The decrease in operating margin isthree months ended September 30, 2023 increased three percentage points, primarily due to revenues growing at a slowerfaster rate as compared to the 23% increasegrowth in content amortization. Revenuecost of revenues and decreased marketing and technology and development expenses, partially offset by higher growth during the quarter was impacted by fluctuations in foreign exchange rates, while content amortization increasedgeneral and administrative expenses as a result of delays in content releases duecompared to the COVID-19 pandemic impacting the comparable prior year period.
The full extent of the impact of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. See Part I, Item 1A: “Risk Factors”growth in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional details. While our productions have resumed, our productions could experience disruption, as could the productions of our third-party content suppliers. Other partners could similarly have their operations disrupted, including those partners that we use for our operations as well as development, production, and post-production of content. Production disruptions and new health and safety protocols and requirements can result in additional costs including additional pay to cast and crew and use of Personal Protective Equipment (“PPE”) and testing. We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, partners and stockholders.  It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, suppliers or vendors, or on our financial results.revenues.

Streaming Revenues
We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of September 30, 2022,2023, pricing on our paid plans ranged from the U.S. dollar equivalent of $1 to $26$28 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $8 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.
Three months ended September 30, 2023 as compared to the three months ended September 30, 2022
Three Months EndedChange
 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
 (in thousands, except percentages)
Streaming revenues$8,519,306 $7,890,361 $628,945 %
Nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022
Nine Months EndedChange
 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
 (in thousands, except percentages)
Streaming revenues$24,807,633 $23,651,369 $1,156,264 %

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Streaming revenues for the three months ended September 30, 2023 increased 8% as compared to the three months ended September 30, 2022, primarily due to the 9% growth in average paying memberships, partially offset by a 1% decrease in average monthly revenue per paying membership. The decrease in average monthly revenue per paying membership was primarily due to higher membership growth in regions with lower average monthly revenue per paying membership, changes in plan mix, and limited price increases. Streaming revenues for the nine months ended September 30, 2023 increased 5% as compared to the nine months ended September 30, 2022, primarily due to the 7% growth in average paying memberships, partially offset by a 2% decrease in average monthly revenue per paying membership. The decrease in average monthly revenue per paying membership was primarily due to higher membership growth in regions with lower average monthly revenue per paying membership and changes in plan mix. Additionally, streaming revenues for the nine months ended September 30, 2023 were further impacted by unfavorable fluctuations in foreign exchange rates. We also earn revenue from advertisements presented on our streaming service, consumer products and various other sources. Revenues earned from sources other than monthly membership fees were not material for the three and nine months ended September 30, 2023 and September 30, 2022.
The following tables summarize streaming revenue and other streaming membership information by region for the three and nine months ended September 30, 20222023 and 2021.2022.

United States and Canada (UCAN)
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022
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As of/ Three Months EndedChangeAs of/ Three Months EndedChange
September 30, 2022September 30, 2021Q3'22 vs. Q3'21 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except revenue per membership and percentages) (in thousands, except revenue per membership and percentages)
RevenuesRevenues$3,601,565 $3,257,697 $343,868 11 %Revenues$3,735,133 $3,601,565 $133,568 %
Paid net membership additions104 73 31 42 %
Paid net membership additions (losses)Paid net membership additions (losses)1,750 104 1,646 1,583 %
Paid memberships at end of periodPaid memberships at end of period73,387 74,024 (637)(1)%Paid memberships at end of period77,321 73,387 3,934 %
Average paying membershipsAverage paying memberships73,335 73,988 (653)(1)%Average paying memberships76,446 73,335 3,111 %
Average monthly revenue per paying membershipAverage monthly revenue per paying membership$16.37 $14.68 $1.69 12 %Average monthly revenue per paying membership$16.29 $16.37 $(0.08)— %
Constant currency change (1)Constant currency change (1)12 %Constant currency change (1)— %
Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022
As of/ Nine Months EndedChangeAs of/ Nine Months EndedChange
September 30, 2022September 30, 2021YTD'22 vs. YTD'21 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except revenue per membership and percentages) (in thousands, except revenue per membership and percentages)
RevenuesRevenues$10,489,852 $9,663,312 $826,540 %Revenues$10,943,226 $10,489,852 $453,374 %
Paid net membership additions (losses)Paid net membership additions (losses)(1,828)88 (1,916)(2,177)%Paid net membership additions (losses)3,025 (1,828)4,853 265 %
Paid memberships at end of periodPaid memberships at end of period73,387 74,024 (637)(1)%Paid memberships at end of period77,321 73,387 3,934 %
Average paying membershipsAverage paying memberships74,054 74,105 (51)— %Average paying memberships75,259 74,054 1,205 %
Average monthly revenue per paying membershipAverage monthly revenue per paying membership$15.74 $14.49 $1.25 %Average monthly revenue per paying membership$16.16 $15.74 $0.42 %
Constant currency change (1)Constant currency change (1)%Constant currency change (1)%

Europe, Middle East, and Africa (EMEA)
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022
As of/ Three Months EndedChange
 September 30, 2022September 30, 2021Q3'22 vs. Q3'21
 (in thousands, except revenue per membership and percentages)
Revenues$2,375,814 $2,432,239 $(56,425)(2)%
Paid net membership additions568 1,804 (1,236)(69)%
Paid memberships at end of period73,534 70,500 3,034 %
Average paying memberships73,250 69,598 3,652 %
Average monthly revenue per paying membership$10.81 $11.65 $(0.84)(7)%
Constant currency change (1)%
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As of/ Three Months EndedChange
 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
 (in thousands, except revenue per membership and percentages)
Revenues$2,693,146 $2,375,814 $317,332 13 %
Paid net membership additions (losses)3,953 568 3,385 596 %
Paid memberships at end of period83,760 73,534 10,226 14 %
Average paying memberships81,784 73,250 8,534 12 %
Average monthly revenue per paying membership$10.98 $10.81 $0.17 %
Constant currency change (1)(2)%
Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022
As of/ Nine Months EndedChange
 September 30, 2022September 30, 2021YTD'22 vs. YTD'21
 (in thousands, except revenue per membership and percentages)
Revenues$7,394,880 $7,176,393 $218,487 %
Paid net membership additions (losses)(502)3,802 (4,304)(113)%
Paid memberships at end of period73,534 70,500 3,034 %
Average paying memberships73,495 68,601 4,894 %
Average monthly revenue per paying membership$11.18 $11.62 $(0.44)(4)%
Constant currency change (1)%

As of/ Nine Months EndedChange
 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
 (in thousands, except revenue per membership and percentages)
Revenues$7,772,957 $7,394,880 $378,077 %
Paid net membership additions (losses)7,031 (502)7,533 1,501 %
Paid memberships at end of period83,760 73,534 10,226 14 %
Average paying memberships79,142 73,495 5,647 %
Average monthly revenue per paying membership$10.91 $11.18 $(0.27)(2)%
Constant currency change (1)(1)%

Latin America (LATAM)
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Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022
As of/ Three Months EndedChangeAs of/ Three Months EndedChange
September 30, 2022September 30, 2021Q3'22 vs. Q3'21 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except revenue per membership and percentages) (in thousands, except revenue per membership and percentages)
RevenuesRevenues$1,023,945 $915,297 $108,648 12 %Revenues$1,142,811 $1,023,945 $118,866 12 %
Paid net membership additions312 330 (18)(5)%
Paid net membership additions (losses)Paid net membership additions (losses)1,179 312 867 278 %
Paid memberships at end of periodPaid memberships at end of period39,936 38,988 948 %Paid memberships at end of period43,645 39,936 3,709 %
Average paying membershipsAverage paying memberships39,780 38,823 957 %Average paying memberships43,056 39,780 3,276 %
Average monthly revenue per paying membershipAverage monthly revenue per paying membership$8.58 $7.86 $0.72 %Average monthly revenue per paying membership$8.85 $8.58 $0.27 %
Constant currency change (1)Constant currency change (1)16 %Constant currency change (1)%
Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022
As of/ Nine Months EndedChangeAs of/ Nine Months EndedChange
September 30, 2022September 30, 2021YTD'22 vs. YTD'21 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except revenue per membership and percentages) (in thousands, except revenue per membership and percentages)
RevenuesRevenues$3,053,127 $2,612,826 $440,301 17 %Revenues$3,290,438 $3,053,127 $237,311 %
Paid net membership additions (losses)Paid net membership additions (losses)(25)1,451 (1,476)(102)%Paid net membership additions (losses)1,946 (25)1,971 7,884 %
Paid memberships at end of periodPaid memberships at end of period39,936 38,988 948 %Paid memberships at end of period43,645 39,936 3,709 %
Average paying membershipsAverage paying memberships39,728 38,272 1,456 %Average paying memberships42,129 39,728 2,401 %
Average monthly revenue per paying membershipAverage monthly revenue per paying membership$8.54 $7.59 $0.95 13 %Average monthly revenue per paying membership$8.68 $8.54 $0.14 %
Constant currency change (1)Constant currency change (1)17 %Constant currency change (1)%
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Asia-Pacific (APAC)
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022
As of/ Three Months EndedChange
 September 30, 2022September 30, 2021Q3'22 vs. Q3'21
 (in thousands, except revenue per membership and percentages)
Revenues$889,037 $834,002 $55,035 %
Paid net membership additions1,429 2,176 (747)(34)%
Paid memberships at end of period36,228 30,051 6,177 21 %
Average paying memberships35,514 28,963 6,551 23 %
Average monthly revenue per paying membership$8.34 $9.60 $(1.26)(13)%
Constant currency change (1)(3)%
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As of/ Three Months EndedChange
 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
 (in thousands, except revenue per membership and percentages)
Revenues$948,216 $889,037 $59,179 %
Paid net membership additions (losses)1,881 1,429 452 32 %
Paid memberships at end of period42,427 36,228 6,199 17 %
Average paying memberships41,487 35,514 5,973 17 %
Average monthly revenue per paying membership$7.62 $8.34 $(0.72)(9)%
Constant currency change (1)(6)%
Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022
As of/ Nine Months EndedChange
 September 30, 2022September 30, 2021YTD'22 vs. YTD'21
 (in thousands, except revenue per membership and percentages)
Revenues$2,713,510 $2,395,896 $317,614 13 %
Paid net membership additions3,596 4,559 (963)(21)%
Paid memberships at end of period36,228 30,051 6,177 21 %
Average paying memberships34,316 27,500 6,816 25 %
Average monthly revenue per paying membership$8.79 $9.68 $(0.89)(9)%
Constant currency change (1)(1)%

As of/ Nine Months EndedChange
 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
 (in thousands, except revenue per membership and percentages)
Revenues$2,801,012 $2,713,510 $87,502 %
Paid net membership additions (losses)4,404 3,596 808 22 %
Paid memberships at end of period42,427 36,228 6,199 17 %
Average paying memberships40,083 34,316 5,767 17 %
Average monthly revenue per paying membership$7.76 $8.79 $(1.03)(12)%
Constant currency change (1)(6)%
(1) We believe constant currency information is useful in analyzing the underlying trends in average monthly revenue per paying membership. In order to exclude the effect of foreign currency rate fluctuations on average monthly revenue per paying membership, we estimate current period revenue assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period. For the three and nine months ended September 30, 2022,2023, our revenues would have been approximately $548$9 million lower and $1,167$568 million higher, respectively, had foreign currency exchange rates remained constant with those for the three and nine months ended September 30, 2021.

2022.
Cost of Revenues
Amortization of content assets makes up the majority of cost of revenues. Expenses directly associated with the acquisition, licensing and production of content (such as payroll, stock-based compensation, facilities, and other related personnel expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production related costs and participations and residuals), streaming delivery costs and other operations costs make up the remainder of cost of revenues. We have built our own global content delivery network (“Open Connect”) to help us efficiently stream a high volume of content to our members over the internet. Delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering content over the internet. Other operations costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs directly incurred in making our content available to members.

Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022
Three Months EndedChange
September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21
(in thousands, except percentages)
Cost of revenues$4,788,665 $4,206,589 $582,076 14 %
As a percentage of revenues60 %56 %

Three Months EndedChange
September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except percentages)
Cost of revenues$4,930,788$4,788,665$142,123 %
As a percentage of revenues58 %60 %
The increase in cost of revenues for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 is primarily due to a $222 million increase in other content expenses, partially offset by an $80 million decrease in content amortization due to the timing of content releases.
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Nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022
Nine Months EndedChange
September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except percentages)
Cost of revenues$14,407,883$13,764,125$643,758 %
As a percentage of revenues58 %58 %
The increase in cost of revenues for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily due to a $691$362 million increase in content amortization relating to our existing and new content, including more exclusive and original programming.
Nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021
Nine Months EndedChange
September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21
(in thousands, except percentages)
Cost of revenues$13,764,125 $12,093,108 $1,671,017 14 %
As a percentage of revenues58 %55 %

The increase in cost Other costs of revenues wasincreased $282 million primarily due to a $1,592 millionan increase in other content amortization relating to our existing and new content, including more exclusive and original programming.expenses.
Marketing
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Marketing expenses consist primarily of advertising expenses and certain payments made to our marketing and advertising sales partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators, and internet service providers (“ISPs”). Advertising expenses include promotional activities such as digital and television advertising. Marketing expenses also include payroll, stock-based compensation, facilities, and other related expenses for personnel that support marketing activities.
Three months ended September 30, 20222023 as compared to the three months ended September 30, 2021 2022
Three Months EndedChange
September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21
(in thousands, except percentages)
Marketing$567,954 $635,948 $(67,994)(11)%
As a percentage of revenues%%

Three Months EndedChange
September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except percentages)
Marketing$558,736$567,954$(9,218)(2)%
As a percentage of revenues%%
The decrease in marketing expenses was primarily due to a $68 million decrease in advertising expenses.
Nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021
Nine Months EndedChange
September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21
(in thousands, except percentages)
Marketing$1,698,892 $1,752,433 $(53,541)(3)%
As a percentage of revenues%%

The decrease in marketing expenses was primarily due to a $142$37 million decrease in advertising expenses and $20an $8 million decrease in payments to our marketing partners, partially offset by a $111$36 million increase in personnel-related costs.
Nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022
Nine Months EndedChange
September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except percentages)
Marketing$1,741,266$1,698,892$42,374 %
As a percentage of revenues%%
The increase in marketing expenses was primarily due to a $70 million increase in advertising expenses, partially offset by a $28 million decrease in payments to our marketing partners.
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Technology and Development
Technology and development expenses consist primarily of payroll, stock-based compensation, facilities, and other related expenses for technology personnel responsible for making improvements to our service offerings, including testing, maintaining and modifying our user interface, our recommendations, merchandising and infrastructure. Technology and development expenses also include costs associated with general use computer hardware and software.
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022
Three Months EndedChange
September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except percentages)
Technology and development$657,159$662,739$(5,580)(1)%
As a percentage of revenues%%
Three Months EndedChange
September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21
(in thousands, except percentages)
Technology and development$662,739 $563,887 $98,852 18 %
As a percentage of revenues%%
Technology and development expenses for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 remained relatively flat.
Nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022

Nine Months EndedChange
September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except percentages)
Technology and development$2,002,417$2,037,115$(34,698)(2)%
As a percentage of revenues%%
The increasedecrease in technology and development expenses was primarily due to a $89$50 million decrease in personnel-related costs, partially offset by an increase in personnel-related costs.
Nine months ended September 30, 2022 as comparedexpenses related to the nine months ended September 30, 2021

Nine Months EndedChange
September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21
(in thousands, except percentages)
Technology and development$2,037,115 $1,626,415 $410,700 25 %
As a percentage of revenues%%

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Table of Contents
The increasecontinued improvements in technology and development expenses was primarily due to a $364 million increase in personnel-related costs.our streaming service.
General and Administrative
General and administrative expenses consist primarily of payroll, stock-based compensation, facilities, and other related expenses for corporate personnel. General and administrative expenses also include professional fees and other general corporate expenses.
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022

Three Months EndedChange
September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21
(in thousands, except percentages)
General and administrative$373,213 $321,790 $51,423 16 %
As a percentage of revenues%%

Three Months EndedChange
September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except percentages)
General and administrative$478,591$373,213$105,378 28 %
As a percentage of revenues%%
The increase in general and administrative expenses was primarily due to a $47$52 million increase in personnel-related costs.costs and a $40 million increase in third-party expenses.

Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022

Nine Months EndedChange
September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21
(in thousands, except percentages)
General and administrative$1,180,438 $953,831 $226,607 24 %
As a percentage of revenues%%

Nine Months EndedChange
September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except percentages)
General and administrative$1,281,012$1,180,438$100,574 %
As a percentage of revenues%%
The increase in general and administrative expenses was primarily due to a $242$59 million increase in personnel-related costs.costs and a $53 million increase in third-party expenses.
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Interest Expense
Interest expense consists primarily of the interest associated with our outstanding debt obligations, including the amortization of debt issuance costs. See Note 6 Debt in the accompanying notes to our consolidated financial statements for further detail on our debt obligations.
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022

 Three Months EndedChange
 September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21
 (in thousands, except percentages)
Interest expense$172,575 $190,429 $(17,854)(9)%
As a percentage of revenues%%

 Three Months EndedChange
 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
 (in thousands, except percentages)
Interest expense$175,563$172,575$2,988%
As a percentage of revenues%%
Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022

 Nine Months EndedChange
 September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21
 (in thousands, except percentages)
Interest expense$535,609 $576,191 $(40,582)(7)%
As a percentage of revenues%%

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Table of Contents
 Nine Months EndedChange
 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
 (in thousands, except percentages)
Interest expense$524,614$535,609$(10,995)(2)%
As a percentage of revenues%%
Interest expense primarily consists of interest on our Notes of $172$175 million and $528$524 million for the three and nine months ended September 30, 2022.2023. Interest expense for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 remained relatively flat. The decrease in interest expense for the three andnine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021 was due to the lower average aggregate principal of interest bearing notes outstanding.
Interest and Other Income
Interest and other income consists primarily of foreign exchange gains and losses on foreign currency denominated balances and interest earned on cash, cash equivalents and cash equivalents.short-term investments.
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022

 Three Months EndedChange
 September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21
 (in thousands, except percentages)
Interest and other income$261,404 $96,135 $165,269 172 %
As a percentage of revenues%%

 Three Months EndedChange
 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
 (in thousands, except percentages)
Interest and other income$168,218$261,404$(93,186)(36)%
As a percentage of revenues%%
Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022

Nine Months EndedChange Nine Months EndedChange
September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except percentages) (in thousands, except percentages)
Interest and other incomeInterest and other income$677,275 $302,702 $374,573 124 %Interest and other income$123,975$677,275$(553,300)(82)%
As a percentage of revenuesAs a percentage of revenues%%As a percentage of revenues— %%
Interest and other income increaseddecreased in the three and nine months ended September 30, 20222023 primarily due to foreign exchange gains of $89 million and foreign exchange losses of $41 million, respectively, compared to gains of $249 million and $680 million, respectively, compared to foreign exchange gains of $103 million and $301 million, respectively, for the corresponding periods in 2021.2022. In the three months ended September 30, 2023, the foreign exchange gains were primarily driven by the non-cash gains of $173 million from the remeasurement of our €5,170 million Senior Notes, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the nine months ended September 30, 2023, the foreign exchange losses were primarily driven by the remeasurement of cash and content liability positions in currencies other than the functional currencies, partially offset by the non-cash gains of $63 million from the remeasurement of our €5,170 million Senior Notes. In the three and nine months ended September 30, 2022, the foreign exchange gains were primarily driven by the non-cash gains of $348 million and $815 million, respectively, from the remeasurement of our €5,170 million Senior Notes, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the threeThe change in foreign currency gains and nine months ended September 30, 2021, the foreign exchange gains were primarily driven by the non-cash gains of $136 million and $327 million, respectively, from the remeasurement of our €5,170 million Senior Notes,losses was partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies.

Provision for Income Taxes
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offset by higher interest income earned in the three and nine months ended September 30, 2023 as compared to the corresponding periods in 2022.
Provision for Income Taxes
Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022
 Three Months EndedChange
 September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21
 (in thousands, except percentages)
Provision for income taxes$223,605 $211,888 $11,717 %
Effective tax rate14 %13 %

 Three Months EndedChange
 September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
 (in thousands, except percentages)
Provision for income taxes$231,627 $223,605 $8,022 %
Effective tax rate12 %14 %
Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022
 Nine Months EndedChange
 September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21
 (in thousands, except percentages)
Provision for income taxes$787,953 $780,451 $7,502 %
Effective tax rate15 %15 %

 Nine Months EndedChange
 September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
 (in thousands, except percentages)
Provision for income taxes$587,103 $787,953 $(200,850)(25)%
Effective tax rate12 %15 %
The effective tax raterates for the three and nine months ended September 30, 20222023 differed from the Federal statutory rate primarily due to the impact of international provisions of the Tax Cuts and Jobs Act, the Federalresearch and California R&D credits, and the recognition of excess tax benefits of stock-based compensation. The effective tax rate for the nine months ended September 30, 2022 differed from the Federal statutory rate primarily due to an increase in foreign taxes, offset by the impact of international provisions of the Tax Cuts and Jobs Act, the Federal and California R&Ddevelopment credits, and the recognition of excess tax benefits of stock-based compensation.
The increasedecrease in the effective tax raterates for the three and nine months ended September 30, 2022,2023, as compared to the same period in 20212022 was primarily due to a reduction inthe impact of foreign taxes and the recognition of excess tax benefits of stock-based compensation. The effective tax rate for the nine months ended September 30, 2022 was consistent compared to the same period in 2021.

Liquidity and Capital Resources
As ofChangeAs ofChange
September 30,
2022
December 31,
2021
September 30, 2022 vs. December 31, 2021September 30,
2023
December 31,
2022
September 30, 2023 vs. December 31, 2022
(in thousands, except percentages)(in thousands, except percentages)
Cash, cash equivalents and restricted cash$6,140,314 $6,055,111 $85,203 %
Cash, cash equivalents, restricted cash and short-term investmentsCash, cash equivalents, restricted cash and short-term investments$7,871,037 $6,081,858 $1,789,179 29 %
Short-term and long-term debtShort-term and long-term debt13,888,117 15,392,895 (1,504,778)(10)%Short-term and long-term debt14,300,368 14,353,076 (52,708)— %

Cash, cash equivalents, and restricted cash and short-term investments increased $85$1,789 million in the nine months ended September 30, 20222023 primarily due to cash provided by operations, partially offset by the repaymentrepurchase of debt, purchases of property and equipment and acquisitions.stock.
Debt, net of debt issuance costs, decreased $1,505$53 million primarily due to the remeasurement of our euro-denominated notes, coupled with the repayment upon maturity of the $700 million aggregate principalnotes. The amount of our 5.500% Senior Notes in February 2022. The amount ofprincipal and interest on our outstanding notes due in the next twelve months is $664$1,068 million. As of September 30, 2022,2023, no amounts had been borrowed under the $1 billion Revolving Credit Agreement. See Note 6 Debt in the accompanying notes to our consolidated financial statements.
We anticipate that our future capital needs from the debt market will be more limited compared to prior years. Our ability to obtain this or any additional financing that we may choose to, or need, to, obtainincluding for potential strategic acquisitions and investments, will depend on, among other things, our development efforts, business plans, operating performance, and the condition of the capital markets at the time we seek financing. We may not be able to obtain such financing on terms acceptable to us or at all. If we raise additional funds through the issuance of equity or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution.
In March 2021, our Board of Directors authorized the repurchase of up to $5 billion of our common stock, with no expiration date, and in September 2023, the Board of Directors increased the share repurchase authorization by an additional $10 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may
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discontinue any repurchases of our common stock at any time without prior notice. There were no repurchases duringDuring the nine months ended September 30, 2022.2023, the Company repurchased 9,036,182 shares of common stock for an aggregate amount of $3,545 million. As of September 30, 2022, $4.42023, $10.9 billion remains available for repurchases.
On October 3, 2022, we completed the acquisition of Animal Logic, an Australian animation studio. The transaction was funded with a portion of our existing cash balances.
Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery and personnel-related costs.costs, as well as strategic acquisitions and investments. Cash payment terms for non-original content have historically been in line with the amortization period. Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content. For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized. We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity. We currently anticipate that cash flows from operations, available funds and access to financing sources, including our revolving credit facility, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.
Our material cash requirements from known contractual and other obligations primarily relate to our content, debt and lease obligations. ExpectedAs of September 30, 2023, the expected timing of those payments are as follows:
TotalNext 12 MonthsBeyond 12 Months
Content obligations (1)$21,572,745 $9,667,326 $11,905,419 
Debt (2)17,962,625 664,269 17,298,356 
Operating lease obligations (3)3,328,042 447,421 2,880,621 
Total$42,863,412 $10,779,016 $32,084,396 

Payments due by Period
Contractual obligations (in thousands):TotalNext 12 MonthsBeyond 12 Months
Content obligations (1)$19,650,049 $9,512,081 $10,137,968 
Debt (2)17,781,751 1,068,072 16,713,679 
Operating lease obligations (3)3,111,308 491,894 2,619,414 
Total$40,543,108 $11,072,047 $29,471,061 

(1)As of September 30, 2022,2023, content obligations were comprised of $4.2$4.3 billion included in “Current content liabilities” and $3.0$2.7 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $14.4$12.7 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition. See Note 7 Commitments and Contingencies to the consolidated financial statements for further details.
The material cash requirements above do not include any estimated obligation for the unknown future titles, payment for which could range from less than one year to more than five years. However, these unknown obligations are expected to be significant and we believe could include approximately $1 billion to $4 billion over the next three years, with the payments for the vast majority of such amounts expected to occur after the next twelve months. The foregoing range is based on considerable management judgments and the actual amounts may differ. Once we know the title that we will receive and the license fees, we include the amount in the contractual obligations table above.

(2)Debt obligations include our Notes consisting of principal and interest payments. See Note 6 Debt to the consolidated financial statements for further details.

(3)Operating lease obligations are comprised of operating lease liabilities included in "Accrued expenses and other liabilities" and "Other non-current liabilities" on the Consolidated Balance Sheets, inclusive of imputed interest. Operating lease obligations also include additional obligations that are not reflected on the Consolidated Balance Sheets as they did not meet the criteria for recognition. See Note 5 Balance Sheet Components in the accompanying notes to our consolidated financial statements for further details regarding leases.

As of September 30, 2022,2023, we had gross unrecognized tax benefits of $230$213 million. At this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.

Free Cash Flow
We define free cash flow as cash provided by (used in) operating activities less purchases of property and equipment and change in other assets. We believe free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make strategic acquisitions and investments and for certain other activities like stock repurchases. Free cash flow is considered a non-GAAP financial measure and should not be considered in isolation of, or as a substitute for, net income, operating income, net cash provided by (used in) operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP.
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In assessing liquidity in relation to our results of operations, we compare free cash flow to net income, noting that the major recurring differences are excessthe timing impact between content payments overand amortization, non-cash stock-based compensation expense, non-cash remeasurement gain/loss on our euro-denominated debt, and other working capital differences. Working capital differences include deferred revenue, excess property and equipment purchases over depreciation, taxes and semi-annual interest payments on our outstanding debt. Our receivables from members generally settle quickly.
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Three months ended September 30, 20222023 as compared to the three months ended September 30, 20212022

Three Months EndedChangeThree Months EndedChange
September 30,
2022
September 30,
2021
Q3'22 vs. Q3'21September 30,
2023
September 30,
2022
Q3'23 vs. Q3'22
(in thousands, except percentages)(in thousands, except percentages)
Net cash provided by operating activitiesNet cash provided by operating activities$556,810 $82,379 $474,431 576 %Net cash provided by operating activities$1,992,315 $556,810 $1,435,505 258 %
Net cash used in investing activities(84,960)(188,631)(103,671)(55)%
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities296,071 (84,960)381,031 448 %
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities4,113 (81,555)85,668 105 %Net cash provided by (used in) financing activities(2,475,108)4,113 (2,479,221)(60,278)%
Non-GAAP reconciliation of free cash flow:Non-GAAP reconciliation of free cash flow:Non-GAAP reconciliation of free cash flow:
Net cash provided by operating activitiesNet cash provided by operating activities556,810 82,379 474,431 576 %Net cash provided by operating activities1,992,315 556,810 1,435,505 258 %
Purchases of property and equipmentPurchases of property and equipment(84,960)(167,327)82,367 49 %Purchases of property and equipment(103,929)(84,960)18,969 22 %
Change in other assets— (21,304)21,304 100 %
Free cash flowFree cash flow$471,850 $(106,252)$578,102 544 %Free cash flow$1,888,386 $471,850 $1,416,536 300 %

Net cash provided by operating activities increased $474$1,436 million to $557$1,992 million for the three months ended September 30, 2022.2023. The increase in net cash provided by operating activities was primarily driven by a $442 million or 6% increasedecrease in revenues,payments for content assets, coupled with a decrease$616 million or 8% increase in cash payments for content assets.revenues. The payments for content assets decreased $174$1,312 million, from $4,695$4,522 million to $4,522$3,210 million, or 4%, as compared29%. On May 1, 2023, the collective bargaining agreement between the Writers Guild of America (“WGA”) and the Alliance of Motion Picture and Television Producers (“AMPTP”) expired, and on May 2, 2023, the WGA commenced an industry-wide strike, which ended on September 27, 2023. On July 12, 2023, the collective bargaining agreement between the Screen Actors Guild - American Federation of Television and Radio Artists (“SAG-AFTRA”) and the AMPTP expired, and on July 14, 2023, the SAG-AFTRA commenced an industry-wide strike. While the WGA strike has ended, the SAG-AFTRA strike continues, and we have paused and expect to pause additional productions in response to the strike. As a result, the timing of certain production payments will be delayed until productions can resume and may increase the variability in the amortization ofpayments for content assets of $691 million, from $2,963 million to $3,654 million, or 23%. In addition, we had increased payments associated with higher operating expenses, primarily related to increased personnel costs to support our continued improvements in our streaming service and our international expansion.future periods.
Net cash used inprovided by (used in) investing activities decreased $104increased $381 million for the three months ended September 30, 2022,2023, primarily due to a decreaseproceeds from maturities of short-term investments, partially offset by an increase in purchases of property and equipment.
Net cash provided by (used in) financing activities increased $86decreased $2,479 million for the three months ended September 30, 2022,2023, primarily due to there beingthe repurchases of common stock for an aggregate amount of $2,500 million in the three months ended September 30, 2023, as compared to no repurchases of common stock in the three months ended September 30, 2022, as compared to repurchases of common stock2022.
Free cash flow was $211 million higher than net income for an aggregate amount of $100 million in the three months ended September 30, 2021.2023, primarily due to $364 million of amortization expense exceeding cash payments for content assets and $80 million of non-cash stock-based compensation expense, partially offset by $173 million of non-cash remeasurement gain on our euro-denominated debt and $60 million in other non-favorable working capital differences.
Free cash flow was $926 million lower than net income for the three months ended September 30, 2022, primarily due to $868 million of cash payments for content assets overexceeding amortization expense and $348 million of non-cash remeasurement gain on our euro-denominated debt, partially offset by $152 million of non-cash stock-based compensation expense and $138 million in other favorable working capital differences.
Free cash flow was $1,555 million lower than net income for the three months ended September 30, 2021, primarily due to $1,732 million of cash payments for content assets over amortization expense and $136 million of non-cash remeasurement gain on our euro-denominated debt, partially offset by $218 million in other favorable working capital differences and $95 million of non-cash stock-based compensation expense.
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Nine months ended September 30, 20222023 as compared to the nine months ended September 30, 20212022
Nine Months EndedChangeNine Months EndedChange
September 30,
2022
September 30,
2021
YTD'22 vs. YTD'21September 30,
2023
September 30,
2022
YTD'23 vs. YTD'22
(in thousands, except percentages)(in thousands, except percentages)
Net cash provided by operating activitiesNet cash provided by operating activities$1,582,399 $795,884 $786,515 99 %Net cash provided by operating activities$5,611,287 $1,582,399 $4,028,888 255 %
Net cash used in investing activities(489,533)(385,525)104,008 27 %
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities130,155 (489,533)619,688 127 %
Net cash used in financing activitiesNet cash used in financing activities(670,959)(1,013,757)(342,798)(34)%Net cash used in financing activities(3,498,530)(670,959)2,827,571 421 %
Non-GAAP reconciliation of free cash flow:Non-GAAP reconciliation of free cash flow:Non-GAAP reconciliation of free cash flow:
Net cash provided by operating activitiesNet cash provided by operating activities1,582,399 795,884 786,515 99 %Net cash provided by operating activities5,611,287 1,582,399 4,028,888 255 %
Purchases of property and equipmentPurchases of property and equipment(296,136)(358,606)(62,470)(17)%Purchases of property and equipment(266,920)(296,136)(29,216)(10)%
Change in other assets— (26,919)(26,919)(100)%
Free cash flowFree cash flow$1,286,263 $410,359 $875,904 213 %Free cash flow$5,344,367 $1,286,263 $4,058,104 315 %
Net cash provided by operating activities increased $787$4,029 million to $1,582$5,611 million for the nine months ended September 30, 2022.2023. The increase in net cash provided by operating activities was primarily driven by a $1,775decrease in payments for content assets, coupled with a $1,127 million or 8%5% increase in revenues, partially offset by an increase in investments in content that require more upfront cash payments.revenues. The payments for content assets increased $293decreased $3,289 million, from $12,655$12,949 million to $12,949$9,660 million, or 2% as compared to the increase in the amortization of content assets of $1,592 million, from $8,489 million to $10,081 million, or 19%25%. In addition, we had increased payments associated with higher operating expenses, primarily related to increased personnel costs to support our continued improvements in our streaming service and our international expansion

Net cash used inprovided by (used in) investing activities increased $104$620 million for the nine months ended September 30, 2022,2023, primarily due to proceeds from the increasematurities of short-term investments and there being no acquisitions in the nine months ended September 30, 2023, as compared to acquisitions partially offset by a decrease in purchasesfor an aggregate amount of property and equipment.
Net cash used in financing activities decreased $343$193 million in the nine months ended September 30, 2022, partially offset by purchases of short-term investments.

Net cash used in financing activities increased $2,828 million for the nine months ended September 30, 2023, primarily due to there beingrepurchases of common stock for an aggregate amount of $3,545 million in the nine months ended September 30, 2023, as compared to no repurchases of common stock in the nine months ended September 30, 2022, as compared to repurchasespartially offset by there being no repayment of common stock for an aggregate amount of $600 milliondebt in the nine months ended September 30, 2021, partially offset by2023 as compared to the repayment upon maturity of the $700 million aggregate principal amount of our 5.500% Senior Notes in February 2022 as compared2022.

Free cash flow was $874 million higher than net income for the nine months ended September 30, 2023, primarily due to the repayment upon maturity$783 million of the $500amortization expense exceeding cash payments for content assets and $257 million aggregate principal amount of non-cash stock-based compensation expense, partially offset by $103 million in other non-favorable working capital differences and $63 million of non-cash remeasurement gain on our 5.375% Senior Notes in February 2021.euro-denominated debt.

Free cash flow was $3,150 million lower than net income for the nine months ended September 30, 2022, primarily due to $2,868 million of cash payments for content assets overexceeding amortization expense and $815 million of non-cash remeasurement gain on our euro-denominated debt, partially offset by $422 million of non-cash stock-based compensation expense and $111 million in other favorable working capital differences.
Free cash flow was $4,098 million lower than net income for the nine months ended September 30, 2021, primarily due to $4,166 million of cash payments for content assets over amortization expense and $327 million of non-cash remeasurement gain on our euro-denominated debt, partially offset by $304 million of non-cash stock-based compensation expense and $91 million in other favorable working capital differences.

Indemnification
The information set forth under Note 78 Commitments and Contingencies to the consolidated financial statements under the caption “Indemnification” is incorporated herein by reference.

Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles generally accepted inand the United StatesCompany’s discussion and analysis of America requiresits financial condition and operating results require the Company’s management to make estimatesjudgments, assumptions and assumptionsestimates that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reported periods. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

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Content
We acquire, license and produce content, including original programming, in order to offer our members unlimited viewing of video entertainment. The content licenses are for a fixed fee and specific windows of availability. Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense. Payments for content, including additions to content assets and the changes in related liabilities, are classified within "Net cash provided by (used in) operating activities" on the Consolidated Statements of Cash Flows.
We recognize content assets (licensed and produced) as "Content assets, net" on the Consolidated Balance Sheets. For licensed content, we capitalize the fee per title and record a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. For produced content, we capitalize costs associated with the production, including development cost, direct costs and production overhead. Participations and residuals are expensed in line with the amortization of production costs.
Based on factors including historical and estimated viewing patterns, we amortize the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use or ten years, beginning with the month of first availability. The amortization is on an accelerated basis, as we typically expect more upfront viewing, and film amortization is more accelerated than TV series amortization. On average, over 90% of a licensed or produced content asset is expected to be amortized within four years after its month of first availability. We review factors that impact the amortization of the content assets on a regular basis. Our estimates related to these factors require considerable management judgment.
Our business model is subscription based as opposed to a model generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. To date, we have not identified any such event or changes in circumstances. If such changes are identified in the future, these aggregated content assets will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off.

Income Taxes
We record a provision for income taxes for the anticipated tax consequences of our reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.
Although we believe our assumptions, judgments and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.
In evaluating our ability to recover our deferred tax assets, in full or in part, we consider all available positive and negative evidence, including our past operating results, and our forecast of future earnings, future taxable income and prudent and feasible tax planning strategies. The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. Actual operating results in future years could differ from our current assumptions, judgments and estimates. However, we believe that it is more likely than not that most of the deferred tax assets recorded on our Consolidated Balance Sheets will ultimately be realized. We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. As of September 30, 2022, the valuation allowance of $353 million was related to the California R&D credits and certain foreign tax attributes that we do not expect to realize.
We did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. We may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. At September 30, 2022, our estimated gross unrecognized tax benefits were $230 million of which $152 million, if recognized, would favorably impact our future earnings. Due to uncertainties in any tax audit outcome, our estimates of the ultimate settlement of our unrecognized tax positions may change and the actual tax benefits may differ significantly from the estimates.

Recent Accounting Pronouncements

The information set forth underreported. Note 1, to the consolidated financial statements under the caption “Basis of Presentation and Summary of Significant Accounting Policies” is incorporated herein by reference.

of the Notes to consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates included in our Annual Report on Form 10-K for the year ended December 31, 2022.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
For financial market risks related to changes in interest rates, reference is made to Item 7A “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our Annual Report on Form 10-K for the year ended December 31, 2021.2022. Our exposure to market risk has not changed significantly since December 31, 2021.2022.
Interest Rate Risk
At September 30, 2023, our cash equivalents and short-term investments were generally invested in money market funds and time deposits. Interest paid on such funds fluctuates with the prevailing interest rate.
As of September 30, 2023, we had $14.4 billion of debt, consisting of fixed rate unsecured debt in fourteen tranches due between 2024 and 2030. Refer to Note 6 Debt to the consolidated financial statements for details about all issuances. The fair value of our debt will fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest. The fair value of our debt will also fluctuate based on changes in foreign currency rates, as discussed below.
Foreign Currency Risk
We operate our business globally and transact in multiple currencies. Currencies denominated in other than the U.S. dollar accounted for 57% of revenue and 28% of operating expenses for the nine months ended September 30, 2022.2023. We therefore have foreign currency risk related to these currencies, which are primarily the euro, the British pound, the Brazilian real, the Canadian dollar, the Mexican Peso,peso, the Japanese yen, and the Australian dollar, and the Japanese yen.dollar.
Accordingly, changesvolatility in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our revenue and operating income as expressed in U.S. dollars. In the nine months ended September 30, 2022,2023, our revenues would have been approximately $1,167$568 million higher had foreign currency exchange rates remained consistent with those in the same period of 2021.2022.
In the third quarter of 2023, we began using foreign exchange forward contracts to mitigate fluctuations in forecasted U.S. dollar-equivalent revenues occurring in January 2024 and beyond from changes in foreign currency exchange rates. These contracts may reduce, but do not entirely eliminate, the effect of foreign currency exchange fluctuations, and we may choose not to hedge certain exposures. We designate these contracts as cash flow hedges of forecasted foreign currency revenue and initially record the gains or losses on these derivative instruments as a component of AOCI and reclassify the amounts into “Revenues” on the Consolidated Statements of Operations in the same period the forecasted transaction affects earnings. If the U.S dollar weakened by 10% as of September 30, 2023, the amount recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $378 million lower. This adverse change in AOCI would be expected to offset a corresponding favorable foreign currency change in the underlying forecasted revenues when recognized in earnings.
In the third quarter of 2023, we also began using foreign exchange forward contracts to mitigate fluctuations in forecasted and firmly committed U.S. dollar-equivalent transactions related to the licensing and production of content assets occurring in January 2024 and beyond from changes in foreign currency exchange rates. These contracts may reduce, but do not entirely eliminate, the effect of foreign currency exchange fluctuations, and we may choose not to hedge certain exposures. We designate these contracts as cash flow hedges and initially record the gains or losses on these derivative instruments as a component of AOCI and reclassify the amounts into “Cost of Revenues” to offset the hedged exposures as they affect earnings, which occurs as the underlying hedged content assets are amortized. If the U.S dollar strengthened by 10% as of September 30, 2023, the amount recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $40 million lower. This adverse change in AOCI would be expected to offset a corresponding favorable foreign currency change in the underlying exposures when recognized in earnings.
We have also experienced and will continue to experience fluctuations in our net income as a result of gains (losses) on the settlement and the remeasurement of monetary assets and liabilities denominated in currencies that are not the functional currency. In the nine months ended September 30, 2022,2023, we recognized a $680$41 million foreign exchange gainloss primarily due to the non-cash remeasurement of our Senior Notes denominated in euros, partially offset by the remeasurement of cash and content liabilities denominated in currencies other than the functional currencies.currencies, partially offset by the non-cash remeasurement of our Senior Notes denominated in euros.
In addition, the effect of exchange rate changes on cash, cash equivalents and restricted cash as disclosed on the Consolidated Statements of Cash Flow for the nine months ended September 30, 20222023 was a decrease of $337$57 million.
We do not use foreign exchange contracts or derivatives to hedge any foreign currency exposures. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our continued international expansion increases our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a significant impact on our future results of operations.

Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that
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such information is accumulated and communicated to our management, including our co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Our management, including our co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
 
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2022,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART II. OTHER INFORMATION
Item 1.Legal Proceedings
The information set forth under Note 78 Commitments and Contingencies in the notes to the consolidated financial statements under the caption “Legal Proceedings” is incorporated herein by reference.

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Item 1A.Risk Factors
There have been no material changes from the risk factors previously disclosed under the heading "Risk Factors"“Risk Factors” in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.

Item 2.Unregistered Sales of Equity Securities, and Use of Proceeds, and Issuer Purchases of Equity Securities
Company Purchases of Equity Securities
In March 2021, the Company’s Board of Directors authorized the repurchase of up to $5 billion of its common stock, with no expiration date. There were noStock repurchases during the three months ended September 30, 2022. As of September 30, 2022, $4.4 billion remains available for repurchases.2023 were as follows:

PeriodTotal Number of Shares Purchased (1)Average Price Paid per Share (2)Total Number of Shares Purchased as Part of Publicly Announced Programs (1)Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
(in thousands)
July 1 - 31, 2023— $— — $3,354,855 
August 1 - 31, 20232,671,397 $425.38 2,671,397 $2,218,494 
September 1 - 30, 20233,293,405 $414.05 3,293,405 $10,854,856 
Total5,964,802 5,964,802 
(1) In March 2021, the Company’s Board of Directors authorized the repurchase of up to $5 billion of its common stock, with no expiration date, and in September 2023, the Board of Directors increased the share repurchase authorization by an additional $10 billion, also with no expiration date. For further information regarding stock repurchase activity, see Note 9 Stockholders’ Equity to the consolidated financial statements in this Quarterly Report.
(2) Average price paid per share includes costs associated with the repurchases.

Item 5.Other Information
Rule 10b5-1 Trading Plans
The adoption or termination of contracts, instructions or written plans for the purchase or sale of our securities by our Section 16 officers and directors for the three months ended September 30, 2023, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (“Rule 10b5-1 Plan”), were as follows:
NameTitleActionDate AdoptedExpiration DateAggregate # of Securities to be Purchased/Sold
Greg Peters (1)Co-CEO and DirectorAdoption7/26/202311/1/2027187,913
Reed Hastings (2)Executive ChairmanAdoption8/8/20237/1/20332,603,399
David Hyman (3)Chief Legal OfficerTermination8/8/2023N/A19,876
Adoption8/8/20238/7/202567,450
(1) Greg Peters, co-CEO and a member of the Board of Directors, entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1 on July 26, 2023. Mr. Peters' plan provides for the potential exercise of vested stock options and the associated sale of up to 187,913 shares of Netflix common stock. The plan expires on November 1, 2027, or upon the earlier completion of all authorized transactions under the plan.
(2) Reed Hastings, Executive Chairman of the Board of Directors, entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1 on August 8, 2023. Mr. Hastings' plan provides for the potential exercise of vested stock options and the associated sale of up to 2,603,399 shares of Netflix common stock. The plan expires on July 1, 2033, or upon the earlier completion of all authorized transactions under the plan.
(3) On August 8, 2023, David Hyman, Chief Legal Officer, terminated a pre-arranged stock trading plan pursuant to Rule 10b5-1, which was adopted on February 6, 2023 and provided for the potential exercise of vested stock options and the associated sale of up to 19,876 shares of Netflix common stock until February 5, 2025 or the earlier completion of all authorized transactions under the plan; no sales occurred under this plan. On August 8, 2023, Mr. Hyman entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1 that provides for the potential exercise of vested stock options and the associated sale of up to 67,450 shares of Netflix common stock. The plan expires on August 7, 2025, or upon the earlier completion of all authorized transactions under the plan.
Other than those disclosed above, none of our directors or officers adopted or terminated a "non-Rule 10b5-1 trading arrangement" as defined in Item 408 of Regulation S-K.

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Item 6.Exhibits
(a) Exhibits:

    See Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q.


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EXHIBIT INDEX
 
Exhibit NumberExhibit DescriptionIncorporated by ReferenceFiled
Herewith
FormFile No.ExhibitFiling Date
8-K001-357273.1June 8, 2022
8-K001-357273.2June 8, 2022
X
X
X
X
101The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Balance Sheets, (v) Consolidated Statements of Stockholders' Equity and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tagsX
104The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRLX
Exhibit NumberExhibit DescriptionIncorporated by ReferenceFiled
Herewith
FormFile No.ExhibitFiling Date
8-K001-357273.1June 8, 2022
8-K001-357273.2February 24, 2023
X
X
X
X
101The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Balance Sheets, (v) Consolidated Statements of Stockholders' Equity and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tagsX
104The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRLX


*    These certifications are not deemed filed by the SEC and are not to be incorporated by reference in any filing we make under the Securities Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general incorporation language in any filings.


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
NETFLIX, INC.
Dated:October 20, 20222023By:/s/ Reed HastingsTed Sarandos
Reed HastingsTed Sarandos
Co-Chief Executive Officer
(Principal executive officer)
Dated:October 20, 20222023By:/s/ Spencer NeumannGreg Peters
Spencer NeumannGreg Peters
Chief FinancialCo-Chief Executive Officer
(Principal financial andexecutive officer)
Dated:October 20, 2023By:/s/ Jeffrey Karbowski
Jeffrey Karbowski
Chief Accounting Officer
(Principal
 accounting officer)

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