After Tuesday's trading hours Eastern Time, Netflix released its fourth quarter financial report.
The financial report shows that driven by the company's measures to crack down on account sharing and multiple popular TV series, the number of users increased significantly in the fourth quarter of last year, and the revenue performance exceeded the expectations of Wall Street analysts.
Netflix's subscription users have skyrocketed
The company reported that it added 13.1 million new users in the fourth quarter of last year, marking its largest fourth quarter user growth in history. This growth far exceeded the market expectation of 8.97 million, bringing the total number of company users to 260 million.
Netflix's stock price rose 8.66% in post market trading on Tuesday. The stock has accumulated a 65% increase in 2023 and has slightly increased by 1.09% since the beginning of this year.
After the UFO, it surged
"It is becoming increasingly clear that Netflix has won the 'streaming war'," wrote Reif Ehrlich, media analyst at Bank of America.
The financial report shows that the company's fourth quarter revenue increased to $8.8 billion, not only exceeding Wall Street's expectations, but also exceeding the company's previous expectation of $8.7 billion.
However, the company's earnings per share in the fourth quarter were $2.11, lower than the widely expected $2.22 per share on Wall Street. The company stated that the currency exchange rate resulted in a non cash loss of $239 million, affecting earnings per share.
Netflix predicts that as the company focuses on improving profitability, combined with factors such as the weakening of the US dollar and unexpected performance in the fourth quarter, the company's full year operating profit margin for fiscal year 2024 is expected to reach 24%, an increase from the previous forecast range of 22% to 23%.
Netflix stated that as it continues to increase its membership and investment in advertising business, it is expected to achieve a strong double-digit growth in revenue for the full year of 2024. The company also stated that although advertising is not currently the main driving force for revenue growth, this situation is expected to change in 2025.
Popular dramas attract a large number of new viewers
The company attributes its profit growth to the launch of multiple people's variety shows and dramas, including the reality show adaptation of its popular TV series "Squid Game: Human Challenge", the new original drama "All The Light We Cannot See", the movie "Rebel Moon: a Child of Fire" directed by Zack Snyder, and some non English language programs, Including the third season of the French youth drama "Lupin".
Netflix executives also mentioned a strong demand from audiences for authorized dramas such as "Little Sheldon". Last November, the spin off of "The Big Bang" series "Little Sheldon" made its debut on the Netflix platform, becoming the highest rated series on the streaming platform. This drama has been airing on the Max platform before.
Ted Sarandos, co-CEO of Netflix, said at an investor conference, "I am pleased that the film company is once again more open to licensing, and I am pleased to inform them that we have opened up our business."
Bank of America's Erich believes that Netflix is one of the biggest winners in the constantly changing market dynamics, which has forced many media companies to reassess their previous strategy of only retaining movies and TV shows for their streaming services.
She stated that this is a "win-win" proposal that allows Netflix to reduce its investment in high-risk original works, while these licensing agreements also provide much-needed revenue for other media companies.
The company stated that if it continues to improve program scheduling and enters new areas such as advertising and gaming, it will gain more growth opportunities. Although Netflix's gaming business is still in its early stages, the company stated that the user stickiness of the business has doubled.
Spencer Neumann, Chief Financial Officer of Netflix, stated that Netflix plans to increase content spending due to the impact of two strikes in Hollywood last year. He expects investment to reach up to $17 billion this year, but he added, "We hope to do this in a smart, wise, and responsible way."
Continue to explore content diversification
The company stated that it will continue to invest in and experiment with live streaming programs.
Earlier on Tuesday Eastern Time, Netflix and TKO Group, the parent company of World Wrestling Entertainment (WWE), announced an agreement worth over $5 billion to exclusively launch WWE's flagship programs such as "Raw" on their streaming services in January 2025.
Sarandos said, "For decades, WWE has developed a fan base of multiple generations, and we believe we can serve them. We can grow and grow... We believe that WWE has not been fully promoted outside of North America. This is a global transaction. So we can help them, and they can also help us establish fan circles around the world."
Third Bridge analyst Jamie Lumley said that the deal with WWE indicates that Netflix will continue to diversify its content strategy.
Ramley said, "This is the biggest step the company has taken so far in live streaming programs, bringing a large amount of content to the platform every year."