In its fourth-quarter earnings report, Netflix has delivered a strong finish to 2023, showcasing strong growth and financial performance with investors reacting positively, driving shares up 8% in after-hours trading.
The streaming giant beat expectations with 13.12 million new streaming paid net additions, beating the analyst estimates of 8.91 million. This recent uptick, representing a 71% year-on-year increase, signifies Netflix’s strongest growth spurt since the pandemic-driven boom.
The report showed that in the United States and Canada (UCAN), Netflix’s added 2.81 million subscribers, a key metric followed by investors, compared to the previous year’s 910,000, surpassing the 1.76 million estimates. Financially, Netflix’s performance was equally impressive. Revenue rose to $8.83 billion, a 12% year-on-year increase, beating the $8.71 billion estimate. The streaming paid memberships climbed to 260.28 million, a 13% increase from the previous year. However, Earnings Per Share (EPS) came in at $2.11, though considerably higher than the previous year’s $0.12, fell slightly short of the $2.19 expectation.
Looking ahead to the first quarter of 2024, Netflix forecasts revenue of $9.24 billion and an EPS of $4.49, with an operating margin of 26.2%. For the entire year, the company anticipates double-digit revenue growth (excluding foreign exchange impacts), around $6 billion in free cash flow, and an operating margin of 24%.
In a strategic move, Netflix announced that it is not interested in acquiring linear assets, with the company rather focusing on its new ads plan, which now accounts for 40% of all Netflix sign-ups in its ads markets. The plan includes retiring the Basic plan in some countries, starting with Canada and the UK in Q2. In recent years, Netflix has sought to expand its business model, with the company investing heavily into video game development and recently striking a deal to live stream wrestling exclusively to its platform in various regions from January 2025.
Netflix’s stock responded positively to the earnings report, with shares rising 8.5% in after-hours trading. While no longer a holding within the US Growth portfolio, the gain in shares highlights the market’s confidence in Netflix’s growth trajectory and strategic direction, making it a stock to keep an eye on.
