Netflix added a far-better-than-expected 13 million subscribers to reach 260.3 million globally as of the end of 2023.
The company missed earnings per share forecasts and barely edged Wall Street expectations for total revenue as it faced tricky comparisons with the year-ago quarter and continued impact from a recent price increase.
Wall Street analysts had predicted the company would add between 8 million and 9 million subscribers in the period. Their consensus called for revenue of $8.71 billion and EPS of $2.20. The actual top- and bottom-line figures came in at $8.8 billion and $2.11, respectively.
Two of the company’s ongoing initiatives, advertising and paid password sharing, continued to yield results in the quarter. Last November, Netflix said its $7-a-month ad tier had generated 15 million monthly active users, rising to 23 million by this month, according to internal projections.
The quarter featured unanticipated dynamics due the SAG-AFTRA strike, which lingered into November. Netflix was by no means immune to the strike, but the walkout combined with the WGA strike earlier in the year to largely wipe out new programming for linear networks during a period when they have historically welcomed new shows and viewers. College and NFL football were Netflix’s main competition in the period, and the fourth quarter also saw the releases of popular original films like Leo and Leave the World Behind as well as third-party titles like No Hard Feelings and Spider-Man: Across the Spiderverse. Top English-language series in the quarter included the final episodes of The Crown and All the Light We Cannot See.
While the subscriber growth was spectacular in the period, Netflix in recent quarters has emphasized profitability as opposed to pure top-line growth. The company said its operating margin grew to 21% in 2023, up from 18% in 2022 and ahead of internal projections for 20%. Free cash flow finished the year at $6.9 billion. Once the poster child for debt-financed tech startups trying to grow into its sky-high stock price, Netflix is approaching its 30th anniversary as a more mature and profitable entity, the envy of newer direct-to-consumer entrants like Disney, Warner Bros. Discovery and NBCUniversal that are eager to prove to Wall Street that they can stanch the flow of red ink in streaming.
Free cash flow in the quarter hit $1.6 billion, up sharply from $300 million in the prior-year period. Full-year FCF included about $1 billion in delayed spending due to the strikes.
Over the past four years, the company said it’s generated $12 billion in net cash provided by operating activities and over $10 billion in positive free cash flow, recouping deficits it generated from 2016-2019 as it invested heavily to build out original programming and global production.
The earnings news came on the same day of two other major developments for Netflix. The company announced it has acquired rights to Monday Night Raw and other WWE programming, marking a milestone in the shift of sports (or at least sports-adjacent fare) from linear TV to streaming. It also was able to claim the highest tally of overall Oscar nominations of any distributor for the fourth year of the past five, with 18.
Those highlights on Tuesday followed Monday’s news that film chief Scott Stuber plans to exit in March. The former longtime Universal exec built Netflix’s original effort after joining the company in 2017, but the elevation of Bela Bajaria last year to Chief Content Officer put a management layer between Stuber and Co-CEO Ted Sarandos.