Netflix (NFLX) stock jumped by over 14% in pre-market trading on Wednesday, following a blockbuster report that revealed an unprecedented 18.9 million new subscribers in the fourth quarter, along with revenue and earnings figures that handily surpassed expectations.
This subscriber surge represents the biggest quarterly gain in the company’s history and has been accompanied by a $15 billion stock buyback and a raised full-year revenue outlook, according to the company’s after-hours report on Tuesday.
Record subscriber gains amid live event success
The significant subscriber growth comes on the heels of Netflix’s successful end to 2024, which included two back-to-back NFL games, the highly anticipated ‘Jake Paul vs. Mike Tyson’ boxing match, and the return of the popular series ‘Squid Game’.
In response to these successes, the company has announced price hikes across most plans in the US, Canada, Portugal and Argentina, confirming what analysts had consistently predicted.
The company is increasing the price of its ad-supported plan to $7.99 from $6.99, its Standard ad-free tier will now be $17.99, up from $15.49, and its Premium plan will increase by $2 to $24.99.
Additionally, users who want to add an extra member will now pay $8.99, an increase of $1.
Subscriber figures shatter estimates
Wall Street had anticipated Netflix would report just 9.18 million new subscribers, following a gain of 13.12 million paying users in Q4 2023.
The company announced last spring that it would no longer report subscriber numbers at the start of this year.
While this announcement created a degree of market uncertainty, the significant growth of new users this quarter has put to rest any doubts about the platform’s continuing relevance.
Netflix’s live events strategy pays off
During the earnings call, Netflix Co-CEO Greg Peters stated that the substantial jump in subscribers was not driven by a single event, despite the recent push into live sports programming.
“We’ve consistently seen across our history, no single title really drives a majority of our acquisition or engagement,” Peters said, noting that live events accounted for a minority of new customers this quarter.
The Jake Paul and Mike Tyson match in November attracted over 108 million viewers globally, becoming the most-streamed sporting event ever.
For context, the 2024 Super Bowl, which was the most-watched American TV broadcast ever, had 124 million US viewers.
Similarly, the NFL games averaged around 30 million viewers, and were Netflix’s most-watched Christmas Day ever in the US.
The company will continue to expand its live sports content, with the recent debut of WWE Raw and rumors that the company may bid for UFC rights next.
However, the company stated in its shareholder letter that it is not focused on rights for “large regular season sports packages; rather, our live strategy is all about delivering can’t-miss, special event programming.”
Robust financial results and optimistic outlook
Revenue reached $10.25 billion in Q4, exceeding Bloomberg consensus estimates of $10.11 billion and marking a 16% increase compared to the same period last year.
Netflix has also issued guidance for first-quarter revenue of $10.42 billion, which fell slightly short of consensus estimates of $10.48 billion.
Diluted earnings per share (EPS) for the quarter were $4.27, exceeding estimates of $4.18, and were significantly higher than the $2.11 EPS figure reported in the year-ago period.
The company has issued a Q1 EPS guidance of $5.58, which was lower than consensus expectations of $6.01.
Other profitability metrics also came in strong, with operating margins reaching 22.2% in the fourth quarter and 27% for the full year 2024. Netflix anticipates that operating margins will expand to 28.2% in the first quarter.
While analysts had predicted that operating margins would hit 22% in Q4 before jumping to 30% in the current quarter, Netflix has proven to have maintained a more controlled and sustained growth level.
In its shareholder letter, Netflix noted that:
Our business remains intensely competitive with many formidable competitors across traditional entertainment and big tech. We’re fortunate that we don’t have distractions like managing declining linear networks and, with our focus and continued investment, we have good and improving product/market fit around the world.
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