Netflix revenue beats estimates in interesting season

Netflix said Tuesday that its fourth quarter subscriber additions surged, topping its own forecast and sending its stock as much as 14% higher in early trading on Wednesday.

The subscriber additions of 13.12 million beat Netflix’s own forecast of about 9 million with full-year 2023 net additions sitting at roughly 30 million. The company had added 7.67 million paying users in Q4 2022.

Revenue beat Wall Street estimates of $8.71 billion to hit $8.83 billion in the quarter, an increase of 12.5% compared to the same period last year, as the streamer leaned on revenue initiatives like its crackdown on password sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.

Netflix guided to first quarter revenue of $9.24 billion, roughly on par with consensus expectations of $9.28 billion.

In Q4, Netflix revealed EPS of $2.11, which was somewhat below than the $2.20 consensus estimate. Nonetheless, the business above average estimates for first-quarter earnings per share ($4.09 to $4.49). Operating margins exceeded the company’s 20% goal, coming in at 16.9% for the fourth quarter and 21% for the entire year 2023.

In Q4, as well, free cash flow exceeded consensus estimates by $1.58 billion to $1.26 billion. Netflix increased its free cash flow to $6.9 billion for full-year 2023, ahead of its guidance of $6.5 billion. Average revenue per member (ARM) was up 1% year-over-year, with Wall Street analysts expecting ARM to pick up later this year due to the ad tier impact and price hike effects. Ad-tier memberships increased by nearly 70% quarter-over-quarter.