Netflix shares surged after the streaming giant reported its best quarter of growth since viewers were stuck at home in the early days of the pandemic.
The company signed up 13.1 million new customers in the final three months of 2023, exceeding Wall Street’s estimate of 8.91 million and beating projections in every region of the world. Netflix added more than 5 million customers in Europe, the Middle East and Africa alone. Sales rose to $8.83 billion, the company said Tuesday, also topping forecasts.
ADVERTISEMENT
CONTINUE READING BELOW
The stock rose as much as 14% to $559 in New York on Wednesday morning, the biggest gain since October.
Netflix rebounded from a rocky 2022 by posting one of its strongest years of customer growth, buoyed by a crackdown on password sharing, the introduction of a cheaper advertising-supported option and a strong slate of programs. Hit shows of the latest quarter included the post-apocalyptic thriller Leave the World Behind and a documentary about soccer great David Beckham.
Netflix’s strong performance stands in sharp contrast to many of its competitors in Hollywood, which operate shrinking cable networks and unprofitable streaming services. Those companies are now merging and cutting jobs to try and keep up.
Just a couple of years ago, it seemed as though Netflix had hit a ceiling on growth after the company lost customers in the first half of 2022. But the steps taken since then have paid off.
“We believe we’ve successfully addressed account sharing, ensuring that when people enjoy Netflix they pay for the service too,” the company said in a letter to shareholders.
While the ad-supported tier got off to a slow start, it has begun to gather momentum. The company said earlier this month it now has more than 23 million people using the tier. Netflix still has a lot of work to do in order to improve its advertising business, co-Chief Executive Officer Greg Peters said Tuesday. The company needs to add more customers, introduce new products and improve its technology. Management believes Netflix can capture billions of dollars from linear TV networks.
“We got hundreds of millions of qualified households out there that are still yet to sign up for Netflix,” Peters said on a conference call with investors. “I can’t believe it, but they are there and we’ve got to win them over.”
Live wrestling should provide a boost to the advertising business. The company on Tuesday announced a 10-year deal to offer weekly live programming from World Wrestling Entertainment starting in 2025. Co-CEO Ted Sarandos described WWE as sports entertainment and said the deal isn’t a sign of the company’s interest in sports rights — at least not yet.
ADVERTISEMENT
CONTINUE READING BELOW
WWE has a large, multigenerational fan base that will grow on Netflix, especially overseas, he said.
Netflix still makes almost all of its money from people who pay to watch films and TV shows on demand, but it has begun to invest in both live programming and video games.
Despite Peters’ optimism, the robust year-end subscriber growth may not continue into 2024. Netflix said it won’t add as many customers in the first quarter of 2024 as it did in the final months of 2023, though the tally will exceed the year-ago period’s 1.75 million. Wall Street expects Netflix to add 4.31 million customers in the quarter.
That won’t hurt sales growth, however. Netflix said it will continue to boost revenue at a double-digit rate, in part by raising prices, as it has done for many years now.
Fourth-quarter earnings rose to $2.11 a share, though that was short of Wall Street forecasts. Netflix generated net income of $5.41 billion for all of last year and closed 2023 with $7.1 billion in cash and short-term investments.
© 2024 Bloomberg
