Netflix share prices in Nasdaq after-hours trading are spiking well into the double-digit percentages Tuesday, after the streaming giant revealed that it blew the doors off of forecasts for both revenue and subscriber growth in the fourth quarter.
Netflix produced $7.852 billion in revenue from Oct. 1 - Dec. 31, a 3.9% year-over-year increase that significantly bested guidance of only 0.9%.
And Netflix expanded its paid customer ranks by 7.66 million globally in Q4, blowing way past expectations of only 4.5 million added customers. Outside of several quarters amid the pandemic quarantine, Netflix has never beaten its subscriber forecast by this much.
Our Full Netflix Q4 Earnings Coverage:
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Netflix now has 230.75 million customers globally, and it's once again growing in the U.S. and Canada, adding nearly 1 million members in the region during Q4 to finish with 74.3 million total. The streaming company was down nearly 2 million "UCAN" customers for 2022 coming into the fourth quarter.
In its Europe/Middle East/Africa quadrant (EMEA), Netflix added 3.2 million customers in Q4. EMEA now leads all four of the company's market quadrants with a base of 76.73 million members.
Netflix said it is still too "early days" to talk about whether its new $6.99 discounted and partially ad-supported tier helped with the strong quarter.
Likewise, the long-anticipated crackdown is only about to kick in on password sharers -- this was another step Netflix took in April of last year, when its revenue and subscriber growth abruptly stopped, and its market price crashed.
But we're a long way away from April 19, 2022.
And for its part, Netflix thanked a particularly strong quarter in regard to original content for the stark turnaround.
First off, Wednesday, the darkly sly comedic offshoot of 1960s monster sitcom classic The Addams Family, became Netflix's third most popular episodic series ever, capturing 1.237 billion hours of streaming on Netflix's global platform in its first 28 days.
Norwegian fantasy film Troll became Netflix's most popular non-English original movie ever, capturing over 155 million viewing hours in its first four weeks.
The royals-themed Harry & Meghan became Netflix's second most popular documentary ever. And Knives Out sequel The Glass Onion became Netflix's fourth most popular film of all time.
Meanwhile, Netflix reported free cash flow of $332 million -- a luxury most of its "streaming wars" competitors can't boast.
“Now that we are a decade into our original programming initiative and have successfully scaled it, we are past the most cash intensive phase of this buildout," the company said in its quarterly letter to shareholders Thursday. "As a result, we believe we will now be generating sustained, positive annual free cash flow going forward. Assuming no material swings in F/X, we expect at least $3B of FCF for the full year 2023.”
Also in its shareholder letter, Netflix said it had plenty of room to grow. The company noted that it accounts for nearly 8% of TV viewing in the U.S., a market in which streaming still overall accounts for only 40% of total viewing. In Poland, streaming accounts for only 6% of TV watching.
"We believe ultimately the vast majority of time spent on TV will happen via streaming, which should provide a long runway for growth as we continue to improve our service," Netflix added.
