Netflix shares surged in extended trading on Tuesday after reporting 13.1 million new members in the fourth quarter, exceeding Wall Street’s expectations. The firm is expanding its ad-supported service and cracking down on password sharing.
- KEY POINTS.
- Netflix added 13.1 million customers in the fourth quarter.
- The corporation currently has 260.8 million paid subscribers.
- The company also outperformed Wall Street’s revenue estimates.
Netflix currently has 260.8 million paying customers, a new high for the business. The subscriber growth easily exceeds the 8.76 million paid membership additions reported by Netflix in the third quarter. The company also exceeded Wall Street’s fourth-quarter estimates of 8 million to 9 million.
Here are the results:
- Earnings: $2.11 per share vs. $2.22 per share expected by LSEG, formerly known as Refinitiv
- Revenue: $8.83 billion vs. $8.72 billion expected by LSEG
- Total memberships: 260.8 million vs. 256 million expected, according to Street Account
Netflix announced fourth-quarter net income of $937.8 million, or $2.11 per share, compared to $55.3 million, or 12 cents per share, in the previous year period. The corporation reported $8.83 billion in revenue for the quarter, up from $7.85 billion the previous year. As Netflix focuses on increasing profitability, the company raised its 2024 full-year operating margin target to 24%, up from a range of 22% to 23%. It noted a depreciation of the US currency and better-than-expected fourth-quarter results.
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The company also expects profits per share of $4.49 in the fiscal first quarter of 2024, up from Wall Street’s expectation of $4.10. While rivals in the streaming market have failed to achieve profitability and have reduced content spending, Netflix is willing to invest in a broader slate. However, it will not do so through purchases of traditional entertainment companies or linear assets, according to a letter sent to shareholders on Tuesday.
“As our competitors adjust to these changes, it’s logical to expect further consolidation, particularly among companies with large and declining linear networks,” the company said in a statement. “We are not interested in acquiring linear assets.” Nor do we expect that further M&A among traditional entertainment companies will meaningfully alter the competitive climate, given the consolidation that has occurred over the last decade.”
However, that will not prevent the corporation from collaborating with content creators who have traditionally operated in the linear realm. Netflix took another move towards increasing its subscriber base earlier Tuesday, announcing that it would begin streaming the famous WWE Raw next year. The partnership is the streaming platform’s most significant foray into live entertainment. The corporation expects to face continued competition in the future.
“It’s why continuing to improve our entertainment offering is so important, and as many of our competitors cut back on their content spend, we continue to invest in our slate,” the business said in a letter to shareholders.
Netflix is still transitioning from a subscriber-growth-focused to a profit-focused one, boosting income with price increases, password crackdowns, and ad-supported tiers. Investors got a glimpse of growth in Netflix’s advertising-based strategy earlier this month when the company’s president of advertising, Amy Reinhard, told delegates at the Variety Entertainment Summit at CES that the firm now has more than 23 million global monthly active users. This is an increase from the 15 million announced by the firm in November. While Netflix does not envision ads as its key income source in 2024, it is trying to expand that segment of its company.
“We’re focused on the additional work that we can do in that space,” Netflix co-CEO Greg Peters said during the company’s earnings call. “That involves making the advertising plan more appealing. We’ve introduced streaming, greater resolution, and downloads, which equals more engaged partner channels. You will see us doing more. Netflix is also considering making its ad tier more appealing to advertisers, including expanding its sales and ad operations to “meet brands where they need us and how they need us.”
“We’re focused on the long-term revenue potential here,” Peters added. “We are really optimistic about it. It’s a tremendous opportunity.
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