Netflix (NFLX) said Tuesday that fourth-quarter subscriber additions rose, beating its own expectations and sending its shares soaring as much as 14% in early trading Wednesday.
Subscriber additions of 13.12 million exceeded Netflix's own expectations of about 9 million with full-year 2023 net additions of about 30 million. The company added 7.67 million paid users in Q4 2022.
Revenue surpassed Wall Street estimates of $8.71 billion to reach $8.83 billion in the quarter, an increase of 12.5% compared to the same period last year, as the streamer relied on revenue initiatives like its crackdown on password sharing and its ad-supported tier, in addition. to recent price hikes on some subscription plans.
Netflix reached first-quarter revenue of $9.24 billion, roughly matching consensus expectations of $9.28 billion.
Earnings per share (EPS) slightly beat estimates in the quarter as the company reported EPS of $2.11, below consensus expectations of $2.20. The company reported earnings per share of $0.12 in the same period last year.
However, Netflix guided for Q1 EPS of $4.49, ahead of the $4.09 consensus.
Profitability metrics were also strong with operating margins at 16.9% for the fourth quarter and 21% for the full year 2023, ahead of the company's target of 20%.
Free cash flow reached $1.58 billion in the quarter, above consensus expectations of $1.26 billion. The company increased its free cash flow to $6.9 billion for all of 2023 ahead of Netflix's guidance of $6.5 billion amid the impact of Hollywood's double whammy last year.
Average revenue per member, or ARM, rose 1% year over year, in line with the company's expectations of “roughly flat year over year.” Wall Street analysts expect ARM to rebound later this year as the ad class effect and the effects of higher prices take hold.
On the advertising front, ad tier memberships increased nearly 70% quarter-over-quarter, the company said in the earnings release. The advertising plan now represents 40% of all Netflix subscriptions in the markets where it is offered.
Earlier this month, Netflix said its ad level had surpassed 23 million monthly active users, up 8 million from the November update.
It's worth noting that monthly active users, known as MAUs, are not the same as paying subscribers. The company has not yet revealed the actual subscriber numbers for the ad tier or how much revenue it has generated so far. Monthly active units can include multiple people using the same account.
The company said it still expects to spend $17 billion on content next year — but don't expect to be a major M&A buyer, especially when it comes to linear assets.
“We are not interested in acquiring linear assets,” the company said in the earnings release. “We also do not believe that more mergers and acquisitions among traditional entertainment companies will meaningfully change the competitive environment in light of all the mergers that have already occurred over the past decade (Viacom/CBS, AT&T/Time Warner, Disney/Fox , Time Warner/Discovery, etc.).
However, competition remains fierce, which is why continuing to improve our entertainment offering is so important, and with many of our competitors reducing their content spending, we continue to invest in our slate, Netflix said.
Earlier on Tuesday, Netflix and TKO Group Holdings WWE (TKO) announced a new partnership that will bring WWE's flagship show Raw to the streaming service, starting in January 2025.
The 10-year deal marks Netflix's first major venture into the world of live sports entertainment, while Raw will leave linear television for the first time since its inception 31 years ago. The show currently airs on NBCUniversal's USA Network and attracts 17.5 million unique viewers annually, according to the companies.
The financial terms of the deal were not disclosed. Multiple reports He said that the value of the agreement exceeds $5 billion.
Separately, the company announced late Monday that Scott Stuber, head of Netflix movies, will do so exit His position in March.
Click here for the latest stock market news and in-depth analysis, including stock-moving events
Read the latest financial and business news from Yahoo Finance
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”