Netflix Surpasses Subscriber Expectations with 13 Million New Additions in Q4 2023
Netflix, the popular streaming service, has exceeded expectations by adding over 13 million new subscribers in the fourth quarter of 2023. This surge in subscribers has put the company on solid footing as it ended the year with a total of approximately 30 million new additions, surpassing its own forecast of around 9 million. As a result, Netflix’s stock saw a significant increase of more than 5% in after-hours trading.
In addition to the impressive subscriber growth, Netflix also reported strong revenue numbers. The company’s revenue for the fourth quarter reached $8.83 billion, surpassing Wall Street’s guidance of $8.71 billion. This represents a 12.5% increase compared to the same period last year. Netflix attributed this growth to various revenue initiatives, including its crackdown on password sharing, the introduction of an ad-supported tier, and recent price hikes on certain subscription plans.
Looking ahead, Netflix has guided to first-quarter revenue of $9.24 billion, which is in line with consensus expectations of $9.28 billion. While the company slightly missed estimates for earnings per share (EPS) in the fourth quarter, reporting $2.11 compared to consensus expectations of $2.20, it expects to see an improvement in the first quarter with projected EPS of $4.49, surpassing consensus calls for $4.09.
Netflix’s profitability metrics also showed strength, with operating margins at 16.9% for the fourth quarter and 21% for the full year of 2023, exceeding the company’s target of 20%. Furthermore, the company’s free cash flow came in at $1.58 billion for the quarter, surpassing consensus calls of $1.26 billion. Netflix increased its free cash flow to $6.9 billion for the full year, surpassing its guidance of $6.5 billion, despite the impact of last year’s double Hollywood strikes.
One important metric to note is the average revenue per member (ARM), which increased by 1% year-over-year, in line with expectations of being “roughly flat year-over-year.” Analysts predict that ARM will pick up later this year as the impact of the ad tier and price hikes takes hold. Speaking of the ad tier, Netflix reported that ad-tier memberships increased by nearly 70% quarter-over-quarter and now account for 40% of all Netflix sign-ups in the markets where it is offered. However, the company has not disclosed actual subscriber figures or revenue generated from the ad tier.
In other news, Netflix recently announced a new partnership with TKO Group Holding’s WWE, which will bring WWE’s flagship program Raw to the streaming service starting in January 2025. This 10-year deal marks Netflix’s first venture into live sports entertainment and signifies a significant move for Raw, as it will be leaving linear television for the first time in its 31-year history. The program currently airs on NBCUniversal’s USA Network and attracts 17.5 million unique viewers annually.
While the financial details of the Netflix-WWE partnership were not disclosed, reports suggest that the agreement is valued at over $5 billion. This collaboration highlights Netflix’s commitment to expanding its content offerings and diversifying its programming.
On a separate note, Netflix film chief Scott Stuber will be stepping down from his position in March, as announced by the company on Monday. Stuber’s departure comes after his successful tenure at Netflix, during which he oversaw the production of numerous critically acclaimed films.
Overall, Netflix’s impressive subscriber growth, strong revenue numbers, and strategic partnerships demonstrate the company’s continued dominance in the streaming industry. With its commitment to investing $17 billion in content next year and its foray into live sports entertainment, Netflix is poised to maintain its position as a leading player in the ever-evolving world of streaming.