Netflix (NFLX) said Tuesday that its fourth quarter subscriber additions surged, topping its own forecast and sending its stock as much as 10% higher in premarket trading on Wednesday.
The subscriber additions of 13.12 million beat Netflix’s own forecast of about 9 million with full-year 2023 net additions sitting at roughly 30 million. The company had added 7.67 million paying users in Q4 2022.
Revenue beat Wall Street estimates of $8.71 billion to hit $8.83 billion in the quarter, an increase of 12.5% compared to the same period last year, as the streamer leaned on revenue initiatives like its crackdown on password sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.
Netflix guided to first quarter revenue of $9.24 billion, roughly on par with consensus expectations of $9.28 billion.
Earnings per share (EPS) slightly missed estimates in the quarter with the company reporting EPS of $2.11, below consensus expectations of $2.20. The company reported EPS of $0.12 in the year-ago period.
Still, Netflix guided to first quarter EPS of $4.49, ahead of consensus calls for $4.09.
Profitability metrics also came in strong with operating margins sitting at 16.9% for the fourth quarter and 21% for full-year 2023, ahead of the company’s 20% target.
Free cash flow came in at $1.58 billion in the quarter, above consensus calls of $1.26 billion. The company increased its free cash flow to $6.9 billion for full-year 2023 ahead of Netflix’s guidance of $6.5 billion amid the impact of last year’s double Hollywood strikes.
Average revenue per member, or ARM, was up 1% year over year, in line with the company’s expectations of “roughly flat year-over-year.” Wall Street analysts expect ARM to pick up later this year as both the ad tier impact and price hike effects take hold.
On the ads front, ad-tier memberships increased by nearly 70% quarter over quarter, the company said in the earnings release. The ads plan now accounts for 40% of all Netflix sign-ups in the markets it’s offered in.