Netflix Surges on Strong Q4 Subscriber Growth and Revenue Beat

As the streamer grows its ad-supported service and implements password sharing restrictions, Netflix attracted 13.1 million new members in the fourth quarter, topping Wall Street’s forecasts. This news caused the company’s stock to rise by about 11% on Wednesday.

Netflix’s quarterly statistics, which were made public on Tuesday following the closing of the market, show that the service now has 260.8 million paying subscribers—a record for the platform.

Netflix’s subscriber growth easily outpaces the 8.76 million paid membership additions reported in the third quarter. The company also outperformed Wall Street’s fourth-quarter expectations of 8 million to 9 million. These are the results:

• LSEG, formerly known as Refinitiv, expected earnings of $2.22 per share, while earnings were $2.11 per share.
• LSEG expected $8.72 billion in revenue, but actual revenue was $8.83 billion.
• Street Account predicts 256 million memberships, but actual total is 260.8 million.
• Netflix’s fourth-quarter net income was $937.8 million, or $2.11 per share, up from $55.3 million, or 12 cents per share, the previous year.

The company reported revenue of $8.83 billion for the quarter, up from $7.85 billion in the same period last year.

In an attempt to enhance earnings, Netflix raised its full-year operating margin estimate for 2024 from a range of 22% to 23% to 24%. It mentioned better-than-expected fourth-quarter performance and the US dollar’s depreciation.

The company also expects earnings per share of $4.49 in the fiscal first quarter of 2024, up from Wall Street’s forecast of $4.10.

While competitors in the streaming space have struggled to become profitable and have reduced their content spending, Netflix is ready to invest in a larger slate. However, it will not do so by acquiring traditional entertainment companies or linear assets, according to a letter to shareholders issued on Tuesday.

“As our competitors adapt to these changes, it’s reasonable to expect more consolidation, especially among companies with large and shrinking linear networks,” the business said in a statement. “We are not interested in purchasing linear assets. Nor do we believe that more mergers and acquisitions among traditional entertainment companies will significantly alter the competitive landscape, given the consolidation that has already occurred over the last decade.”

That’s not to suggest the business won’t cooperate with content producers who have a history of working in linear media. Netflix took another step toward increasing its subscriber base by announcing earlier on Tuesday that it would begin streaming the popular WWE Raw next year. This contract is the streaming platform’s biggest attempt to reach the live entertainment market.

The business anticipates continued rivalry in the future.

As many of our rivals cut back on their content investment, we continue to invest in our slate, which is why it is so critical that we maintain improving our entertainment offering, the business stated in a letter to shareholders.

Netflix is still shifting its focus from subscriber growth to profit, leveraging price increases, password restrictions, and ad-supported tiers to boost revenues.

Investors saw signs of progress in Netflix’s advertising-based strategy earlier this month, when the company’s president of advertising, Amy Reinhard, told attendees at the Variety Entertainment Summit at CES that the company currently has over 23 million monthly active consumers worldwide. This is an increase from the 15 million reported by the company in November.

While Netflix does not expect ads to be its primary revenue source in 2024, it is still looking to expand that segment of its business.

“During the company’s earnings call, Netflix co-CEO Greg Peters stated, “We’re concentrating on the additional tasks we can do within this domain.” This entails improving the advertising strategy’s attractiveness. Our increased downloads, streams, and resolution translate into more active partner channels. You’ll see us doing more of that.” Netflix is also working to improve its ad tier for advertisers, strengthening its sales teams and ad operations to “match brands’ needs and preferences.”

“We’re aiming for the long-term revenue possibility here,” Peters said. “We are very confident about it. It’s a huge opportunity.”