Netflix earnings: Stock gains 4% as subs, revenues clear expectations bar (updated)
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Updated: Netflix stock (NASDAQ:NFLX) has jumped 4.1% postmarket following a fourth-quarter earnings report where the company easily cleared Street and management expectations for subscriber growth - and narrowly cleared the bar on its newfound top focus of revenue.
Revenues grew 1.9% year-over-year to $7.85B, and the company added a net 7.66M subscribers globally to hit 230.75M total memberships.
The company had expected 4.5M net adds, while Wall Street was a bit more cautious, forecasting 4.1M net adds.
Also, co-founder Reed Hastings gave up his co-CEO position to become executive chairman, leaving content guru Ted Sarandos and product/business chief Greg Peters to share the CEO title.
Operating income in the seasonally weak quarter was $550M (down from the prior year's $632M), and net income down to $55M.
The 2% revenue growth adds up to a 10% gain on a foreign exchange-neutral basis, Netflix noted, and it was driven by a 4% increase in average paid memberships. Average revenue per membership fell 2% from the prior year's Q4; it was up 5% on a currency-neutral basis.
As for a hefty miss on earnings per share, the company says that came to a $462M noncash unrealized loss from foreign-exchange remeasurement on its euro-denominated debt.
For the first quarter, Netflix is guiding to revenue growth of 3.9% (for a figure of $8.17B), and operating income of $1.625B on a margin of 19.9% (which would be its best operating margin since Q1 2022). It foresees net income of $1.275B, or EPS of $2.82.
As reported, the company won't forecast paid memberships anymore, with revenue now its most important metric.
Netflix (NFLX) says a broader rollout of paid sharing later in the first quarter will mean a "very different quarterly paid net adds pattern in 2023," with a big jump coming in Q2.
It's mostly mum on ads so far, saying that while it has "lots to do (in particular better targeting and measurement)," the company is "pleased with our progress to date." Engagement is "better than what we had expected" and the company thinks the lower price point is "driving incremental membership growth. Also, as expected, we've seen very little switching from other plans."
Updated: Breaking down performance by region: In its home U.S./Canada market, paid net adds came to 0.91M, bringing the total to 74.3M. Revenue was $3.595B in total, with average revenue per membership up 10% year-over-year to $16.23.
In EMEA, the company added a net 3.2M paid memberships to land at 76.73M; revenue was $2.35B, and ARM fell 10% to $10.43. In Latin America, it logged 1.76M paid net adds to hit 41.7M, and ARM rose 2% to $8.30; and in Asia Pacific, 1.8M net adds meant a total of 38.02M, and ARM fell 17% to $7.69.
The company's quarterly "earnings interview" with executives - this time moderated by BofA analyst Jessica Reif Ehrlich - is set to arrive at 6 p.m. ET.