Netflix Inc. surpassed 200 million streaming subscribers for the first time in late 2020, as subscriptions increased again despite higher prices in the U.S. and Canada.
On Tuesday afternoon, Netflix NFLX,
reported 8.5 million new net subscribers in the fourth quarter, a dramatic increase from the 2.2 million reported in the previous quarter and well ahead of Netflix and analysts’ estimates. Netflix attracted 25.9 million new subscribers in the first half of the year, as on-site shelter requests related to the COVID-19 pandemic spread globally, with an annual net gain of 36.6 million subscribers for a total of 203 , 7 million.
This performance caused Netflix’s revenue to rise to $ 25 billion for the first time and profit to increase 48% for the entire year. Executives gave investors special treatment after the big gains, telling them that they expect the cash generated by the company to reliably finance day-to-day operations in the future, after years of using massive debt to finance its growing library. video content.
The news caused Netflix’s shares to rise more than 10% in Tuesday’s trading session, although profits were lower than expected. After big gains amid the high of early 2020, Netflix’s shares calmed down in the second half of the year and fell more than 5% in the past three months.
The # 1 streaming service reported net income of $ 542 million in the fourth quarter, or $ 1.19 per share, compared to net income of $ 1.30 per share in the same quarter a year earlier. Revenue increased to $ 6.64 billion from $ 5.47 billion a year ago. Analysts surveyed by FactSet had expected adjusted earnings of $ 1.36 per share on sales of $ 6.6 billion.
After Netflix reported modest gains in the third quarter, there were fears that demand for Netflix was cooling in the face of increasingly intense competition and content from companies like Walt Disney Co.’s DIS,
Disney + and Hulu, AAPL from Apple Inc.,
Apple TV +, AT&T Inc.’s T,
HBO Max, AMZN from Amazon.com Inc.,
Prime Video and CMCSA from Comcast Corp.,
Peacock.
“The huge growth in entertainment streaming has led traditional competitors like Disney, WarnerMedia and Discovery to compete with us in new ways, which we had hoped for many years,” wrote executives in a letter to shareholders on Tuesday. “This is partly why we have moved so quickly to further grow and strengthen our library of original content across a wide range of genres and nations.”
Netflix used huge amounts of debt to finance content creation, but executives said in the letter that “we believe we are very close to being sustainable [free-cash-flow] positive ”, and bolded only a portion of the text in the entire letter.
“We believe that we no longer need to raise external financing for our day-to-day operations,” says the letter’s bold text.
Netflix began raising the price of popular streaming layers in the United States and Canada towards the end of last year as a way to counteract the slowdown in subscriber growth. Executives predict that Netflix will attract 6 million new net subscribers in the first quarter of the year, which would be a massive decline from the more than 15 million who signed up as COVID-19 worldwide in the first quarter of 2020.
Although executives did not provide annual guidance for subscription subscriptions, they said that operating margin growth would slow, a sign that they expect not to add as many subscribers in 2021. After gross margin grew 5 percentage points to 18% in 2020, they expect more modest growth, around 2 percentage points, at 20%, this year.
“We intend to continue to increase our operating margin each year at an average rate of 3 percentage points over any period of a few years, but we anticipate some problems,” wrote the executives. “Some years will be a little longer (as in 2020), some years a little less (as in 2021).”
Netflix shares have risen 47% in the past 12 months, while the S&P 500 SPX index,
increased by 13%.