Netflix Q4: More subscribers than expected, but barely a profit
The streamer had 7.66 million global paying members in the last quarter of 2022 and hit revenue forecasts, but it was sorely lacking on the bottom line.
Netflix added 7.66 million global paid subscribers in the fourth quarter of 2022, bringing the number of subscribers to 230.75 million. Three months ago, Netflix predicted it would add 4.5 million subscribers in the fourth quarter; In retrospect, Wall Street thought we would grow by more than 5 million.
So thanks to Netflix and the ad-supported “Basic with Ads” tier that launched in the US in November. The company’s password-sharing action probably also helped. Netflix said today that “pay-to-play” will roll out “more widely” in the first quarter of 2023.
What wasn’t particularly good was Netflix’s actual revenue for the last three months of 2022. The streamer reported earnings per share (EPS) of just 12 cents on revenue of $7.852 billion; his net income was $55 million. This is the lowest in any quarter since 2016, when Netflix was still (somewhat) heavily in the DVD distribution business in addition to streaming. (A word about “profit” here. Netflix still has $14 billion in gross debt and $8 billion in net debt; all of it is fixed-rate and within the company’s accepted $10-15 billion gross range.)
The revenue figure, which Netflix now considers its “primary top line,” was fine: Wall Street had forecast $7.85 billion there, according to a compilation released by analysts. Yahoo! Finance. However, Netflix’s profit of 12 cents per share fell short of analysts’ estimate of 45 cents.
The point was also missing according to Netflix’s own estimation months ago. When it released its third-quarter results, Netflix forecast fourth-quarter net income of 36 cents per share, or $163 million. Netflix blamed the depreciation of the US dollar and the euro for much of the difference between its internal estimate and the final result.
Netflix beat its internal revenue estimate, surpassing the $7.776 billion figure it reported months ago. Along with higher-than-expected revenue, Netflix’s fourth-quarter operating profit of $550 million was better than estimates of $330 million. Shares of NFLX are currently doing well in after-hours trading, up about 6 percent. Operating income is revenues minus expenses; net income also takes into account taxes, depreciation, and SG&A expenses.
In the fourth quarter of 2021, a traditionally weak quarter for streamers, Netflix reported net income of $607 million, or diluted EPS of $1.33. That was before the stuff hit fans in the first quarter of 2022, when Netflix actually lost subscribers. These losses continued in the second quarter, but rebounded in the second half of the year. Meanwhile, Netflix’s revenue and earnings were much stronger than at the very end of 2022.
Also Thursday, Reed Hastings, the company’s founder and co-CEO, announced that he would step down as co-CEO Ted Sarandos. Greg Peters will assume Sarandos’ role and duties as co-CEO; Hastings remains executive chairman.
In the fourth quarter, Netflix not only attracted and retained subscribers with a cheaper advertising package, but also with content. As it turns out, “Dahmer: Monster: The Jeffrey Dahmer Story,” “The Watcher” and “The Crown” were just the fourth-quarter starters for the blockbuster “Wednesday.”
The “Addams Family” spinoff ended up becoming Netflix’s second-highest-grossing English-language series of all time, behind only “Stranger Things 4.” (“Dahmer” is No. 3; only the Korean-language sensation “Squid Game” was bigger.) “Wednesday” premiered on November 16. Hosted by Jenna Ortega, the series garnered 1.237 billion views in its first 28 days. availability. Netflix renewed “Wednesday” for a second season on January 6.
“Glass Onion: A Knives Out Mystery” was Q4’s blockbuster.
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