Netflix (NFLX) earnings in the fourth quarter of 2022

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Netflix It added millions more subscribers last quarter than Wall Street expected, which helped lift streaming stocks after the bell despite a big dividend loss.

The company also revealed that co-CEO Reed Hastings will be stepping down and transitioning to the role of CEO. Greg Peters, the company’s chief operating officer, has been promoted to co-CEO alongside the already established Ted Sarandos.

Here are the results:

  • EPS: 12 cents versus 45 cents a share, according to Refinitiv.
  • he won: $7.85 billion $7.85 billion, according to a Refinitiv survey.
  • Paid global subscribers: It adds 7.66 million subscribers, compared to an expected 4.57 million, StreetAccount estimates.

Netflix’s EPS failed largely due to a loss on euro-denominated debt, but its margins of 7% still beat Wall Street expectations. The depreciation of the US dollar relative to the euro during the fourth quarter is not an operating loss.

This is the first quarter that the new ad-supported service Netflix is ​​included in its earnings results. The company launched this cheaper tier in November, but did not disclose the portion of new subscriptions from users who opted for this service.

During the company’s pre-recorded earnings call, Netflix said it saw similar participation from members of its new ad tier as it did with regular consumers. In addition, she indicated that she had not seen a large number of people change their plans. Therefore, those who subscribe to its premium and more expensive offerings rarely turn to the cheaper ad-supported model.

“We wouldn’t get into this business if it couldn’t be a meaningful part of our business,” Spencer Newman, the company’s chief financial officer, said during the call. “We’re over $30 billion in revenue, about $32 billion in revenue, in 2022 and we wouldn’t get into a business like this if we didn’t think it could be greater than at least 10% of our revenue.”

In its most recent quarter, the broadcast company said it was “very optimistic” about its new advertising business. Going forward, Netflix will not provide guidance to subscribers, although it will continue to report these numbers in future earnings reports. The rationale is that the company is growing its focus on revenue as a major lead metric rather than 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 accelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid engagement and building our ad offering. As always, our North Stars continue to satisfy our members and drive more profit over time.”

Netflix named new releases such as the TV series “Wednesday” and the documentary series “Harry and Meghan” as well as the Rian Johnson movie “Glass Onion” as popular content during the quarter.

The company expects revenue growth in the first quarter of 2023 to rise 4%, above the 3.7% Wall Street is currently forecasting. Netflix says this growth will be driven by more paid memberships and more money per paid membership.

In addition, the first quarter will see Netflix’s initial launch of its paid sharing program, which aims to earn money from users who have previously shared passwords with people outside their home.

The company said it expects some users who were borrowing accounts to stop watching programming on the platform, because they are not added as additional members to existing accounts or convert into paid members.

“However, we believe the pattern will be similar to what we’ve seen in Latin America, with participation increasing over time as we continue to offer a large slate of programming and subscription for self-account borrowers,” the company said.

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