Netflix adds 13.1 million subscribers, tops revenue estimates as membership push gains steam

LOS ANGELES — Shares of Netflix jumped in extended trading Tuesday after the company reported adding 13.1 million subscribers during the fourth quarter, stronger growth than Wall Street expected as the streamer builds its ad-supported service and cracks down on password sharing.

Netflix now has 260.8 million paid subscribers, a new record for the service.

The subscriber growth easily tops the 8.76 million paid membership adds Netflix reported in the third quarter. The company also blew past Wall Street’s fourth-quarter expectations of 8 million to 9 million.

Here are the results:

• Earnings: $2.11 per share vs. $2.22 per share expected by LSEG, formerly known as Refinitiv
• Revenue: $8.83 billion vs. $8.72 billion expected by LSEG
• Total memberships: 260.8 million vs. 256 million expected, according to Street Account

Netflix reported fourth-quarter net income of $937.8 million, or $2.11 per share, versus $55.3 million, or 12 cents per share, in the prior-year period.

The company posted revenue of $8.83 billion for the quarter, up from $7.85 billion in the year-ago quarter.

As Netflix focuses on improving profits, the company increased its 2024 full-year operating margin forecast to 24%, up from a range of 22% to 23%. It cited the weakening of the U.S. dollar and a stronger-than-forecast fourth-quarter performance.

The company also projects earnings per share of $4.49 for the fiscal first quarter of 2024, higher than the $4.10 Wall Street had expected.

While rivals in the streaming space have struggled to reach profitability, and have been cutting down on content spend, Netflix is prepared to invest in a larger slate. However, it won’t be doing that through acquisitions of traditional entertainment companies or linear assets, the company said in a letter to shareholders Tuesday.

“As our competitors adjust to these changes, it’s logical to expect further consolidation, particularly among companies with large and declining linear networks,” the company said. “We’re not interested in acquiring linear assets. Nor do we believe that further M&A among traditional entertainment companies will materially change the competitive environment given all the consolidation that has already happened over the last decade.”

But that won’t stop the company from partnering with content makers who have traditionally worked in the linear space. Netflix took another step toward building subscribers when it announced earlier Tuesday that it would stream the popular WWE Raw starting next year. The deal is the streaming platform’s biggest step yet into live entertainment.

The company foresees continued competition going forward.

“It’s why continuing to improve our entertainment offering is so important, and as many of our competitors cut back on their content spend, we continue to invest in our slate,” the company wrote to shareholders.

Netflix is still navigating its transformation from targeting subscriber growth to focusing on profit, using price hikes, password crackdowns and ad-supported tiers to boost revenue.

Investors got a sneak preview of growth in Netflix’s advertising-based plan earlier this month, when the company’s president of advertising, Amy Reinhard, told attendees at the Variety Entertainment Summit at CES that the company now has more than 23 million global monthly active users. That’s up from 15 million that the company reported in November.

While Netflix doesn’t see ads as its primary revenue driver in 2024, it’s still looking to scale that part of its business.

“We’re focused on the additional work that we can do in that space,” said Greg Peters, co-CEO of Netflix, during the company’s earnings call. “That means making the ads plan more attractive. We’ve added streams, higher resolution, downloads, it means engaging partner channels. You’ll see us do more than that.”

Netflix is also looking at making its ad tier more attractive to advertisers, including by bolstering its sales teams and ad operations to “meet brands where they need us and how they need us.”

“We’re focused on the long-term revenue potential here,” said Peters. “We’re very optimistic about it. It’s a huge opportunity.”