Summary
- Netflix has exceeded Wall Street's expectations by adding millions more subscribers in the fourth quarter.
- Co-CEO Reed Hastings will be stepping down from his position and transitioning to the post of executive chairman, Greg Peters, the company’s COO, will be promoted to co-CEO alongside Ted Sarandos.
- The company will no longer give subscriber guidance, instead, it will focus on revenue as its primary top-line metric, this shows the company's strategy of investing in original content is paying off and they are well-positioned to continue to grow its subscriber base and revenue in the coming years.
Netflix has exceeded Wall Street's expectations by adding millions more subscribers in the fourth quarter. This has helped send shares of the streamer up despite a big earnings miss. The company also announced that co-CEO Reed Hastings will be stepping down from his position and transitioning to the post of executive chairman. Greg Peters, the company’s chief operating officer has been promoted to co-CEO alongside the already established Ted Sarandos.
The earnings per share (EPS) for the quarter was 12 cents, which missed the 45 cents per share expected by Refinitiv. However, the company's margin of 7% still topped Wall Street's expectations. The revenue was $7.85 billion and the global paid net subscribers added was 7.66 million, compared to the 4.57 million subscribers expected by StreetAccount estimates. The company attributed the EPS miss to a loss related to euro-denominated debt, but the depreciation of the U.S. dollar compared to the euro during the fourth quarter is not an operational loss.
This is the first quarter that Netflix's new ad-supported service is included in its earnings results. The company launched this cheaper tier in November, but has not disclosed what portion of the new subscriptions are from users who have opted for this service. Last quarter, the streamer said it was "very optimistic" about its new advertising business.
Going forward, Netflix will no longer give subscriber guidance, although it will still report those numbers in future earnings reports. The rationale behind this decision is that the company is growing its focus on revenue as its primary top-line metric instead of membership growth.
"2022 was a tough year, with a bumpy start but a brighter finish," the company said in a statement. "We believe we have a clear path to reaccelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid sharing and building our ads offering. As always, our north stars remain pleasing our members and building even greater profitability over time."
Netflix touted new releases like the television series “Wednesday,” the docuseries “Harry and Meghan” as well as Rian Johnson’s film “Glass Onion” as popular content during the quarter. The company's subscriber growth is a positive sign as it faces increasing competition from other streaming services like Disney+, Amazon Prime Video, and Hulu. It also shows that Netflix's strategy of investing in original content is paying off, as more and more people turn to streaming services for entertainment.
Overall, Netflix's fourth-quarter results and the leadership transition are a positive sign for the company's future growth. The company is well-positioned to continue to grow its subscriber base and revenue in the coming years, as long as it continues to invest in high-quality content and improve its advertising business.