Netflix (NFLX) reported a significant increase in fourth-quarter subscriber additions, surpassing its own expectations and resulting in a premarket trading stock surge of up to 10% on Wednesday. The company added 13.12 million subscribers, outperforming its forecast of approximately 9 million, with a total of around 30 million net additions for the entire year. In Q4 2022, Netflix gained 7.67 million paying users. The quarter’s revenue exceeded Wall Street estimates, reaching $8.83 billion, a 12.5% increase from the same period the previous year. Revenue initiatives such as cracking down on password sharing, introducing an ad-supported tier, and implementing price hikes on specific subscription plans contributed to this growth. Netflix anticipates first quarter revenue to be around $9.24 billion, in line with consensus expectations of $9.28 billion. However, the company fell slightly short of quarterly earnings per share (EPS) estimates, reporting $2.11 compared to the consensus of $2.20. Nevertheless, Netflix projects first quarter EPS to be $4.49, surpassing consensus calls for $4.09. The company’s operational margins stood at 16.9% for the fourth quarter and 21% for the full year of 2023, exceeding the targeted 20% mark. Free cash flow for the quarter was $1.58 billion, surpassing the consensus of $1.26 billion, while the full-year 2023 free cash flow of $6.9 billion exceeded Netflix’s guidance of $6.5 billion, despite the impact of last year’s double Hollywood strikes. The average revenue per member (ARM) rose by 1% year over year, aligning with the company’s expectation of a “roughly flat year-over-year” growth. Analysts anticipate an increase in ARM later in the year due to the effects of the ad tier and price hikes. The company revealed that ad-tier memberships had increased by nearly 70% quarter over quarter, accounting for 40% of all Netflix sign-ups in markets where it is available. Additionally, Netflix announced that its ad tier had attracted over 23 million monthly active users, an increase of 8 million from November. However, it has not disclosed the actual subscriber figures for the ad tier or its generated revenue. Despite planning to spend $17 billion on content in the following year, Netflix stated that it does not intend to make significant acquisitions, especially of linear assets, as the competition in the industry remains fierce. The company aims to continue enhancing its entertainment offerings. Netflix has partnered with TKO Group Holdings’ WWE to bring WWE’s flagship program Raw to its streaming service from January 2025. This marks Netflix’s first major foray into live sports entertainment, with Raw leaving linear television for the first time in its 31-year history. The financial details of the 10-year deal have not been disclosed, but reports suggest it is valued at over $5 billion. Separately, the company announced that Scott Stuber, the head of Netflix’s film division, will step down from his position in March.Netflix subscribers surged in the fourth quarter of 2023. (Getty Images) (Wachiwit via Getty Images)Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.Click here for the latest stock market news and in-depth analysis, including events that move stocksRead the latest financial and business news from Yahoo Finance
