Netflix fritters away anticipations on subscriber digits

January 23, 2023: Netflix stated that millions more subscribers in the fourth quarter than Wall Street anticipated, helping to send streamer shares up after the bell despite a big earnings miss.

The company disclosed that co-CEO Reed Hastings stepped down from his position and transitioned to the post of executive chairman. Greg Peters, the firm’s chief operating officer, has been heightened to co-CEO alongside the already-established Ted Sarandos.

Netflix’s EPS was missed mainly due to a loss related to euro-denominated debt, but its limits of 7% still topped Wall Street’s expectations. The devaluation of the U.S. dollar compared to the euro in the fourth quarter isn’t an operational loss.

This is the initial quarter that Netflix’s new ad-supported service is included in its revenue results. The firm launched this cheaper tier in November but has yet to disclose the portion of the new subscriptions from users who have opted for this service.

During the firm’s prerecorded earnings call, Netflix said it had seen comparable engagement from its new ad tier members as it had seen with its regular consumers. Additionally, it noted that it had yet to see many people switching plans. So, the subscribers to its premium and more expensive offerings are bumping down to the cheaper ad-supported model.

“We would not be getting into this firm if it couldn’t be a worthy portion of the business,” stated Spencer Neumann, the company’s chief financial officer, in the call. “We’re more than $30 billion in revenue, almost $32 billion in earnings, in 2022, and we will not get into a business like this if we didn’t believe it could be huge than at least 10% of our revenue.”

The streamer has stated that it was “very optimistic” about its recent advertising business in the previous quarter. In the future, Netflix will no longer give subscriber guidance, although it will report those numbers in future earnings files. The rationale is that the firm is growing its focus on revenue as its primary top-line metric instead of membership growth.

“2022 was a difficult year, with a tough begin but a brighter finish,” the company said. “We believe we have a clear way to reaccelerate our earnings growth, continuing to improve all aspects of Netflix, which launch paid sharing and building our ads offering. As constantly, our north stars remain delighting our members and building even greater profitability more than time.”