Netflix added more than 13 million subscribers during the fourth quarter, the company said Tuesday, extending its lead in the streaming video business.
The Los Gatos, Calif.-based streamer's subscriber growth beat analysts' estimates of nearly 8.7 million customer additions, according to polling by FactSet. It was the largest fourth-quarter growth in subscriber adds in the company's history, bringing its total subscribers to about 260 million, Netflix said.
The company reported revenue of $8.8 billion in the fourth quarter, up 12.5% from the same time a year earlier. Net income was $938 million, compared with $55 million in the fourth quarter of 2022. Netflix beat analyst expectations of $8.72 billion in revenue but missed on estimates of $990 million in net income, according to FactSet.
"We believe there is plenty of room for growth ahead as streaming expands, and our north star remains the same: to thrill members with our entertainment," Netflix said in a letter to shareholders on Tuesday. "If we can continue to improve Netflix faster than the competition, we’ll have an increasingly valuable business — for consumers, creators and shareholders."
Netflix earlier on Tuesday announced a major sports rights deal with WWE, bringing weekly pro wrestling show "Raw" exclusively to Netflix in the U.S., Canada, the United Kingdom, Latin America and other territories starting in January 2025. The streamer will also carry WWE shows and specials outside the U.S., including “SmackDown” and “NXT,” its live events like WrestleMania, as well as WWE documentaries and series in 2025.
The deal is for an initial 10 years with rights fees equaling more than $5 billion, with an option for Netflix to extend the agreement, according to a regulatory filing from TKO, the parent company of WWE.
Netflix stock closed at $492.19 a share, up 1%, and continued to increase about 8% in after-hours trading to $531.35 a share.
"The announcement is a coup for Netflix, in our view, given Raw's historical popularity," wrote John Blackledge, a TD Cowen managing director and senior research analyst, in a report. TD Cowen has an outperform rating on Netflix stock.
Netflix Co-Chief Executive Ted Sarandos in an earnings presentation said WWE "Raw" is in the "sweet spot" of its sports business, which is the "drama of sport," as opposed to day-to-day coverage of competitive athletics.
"We believe that WWE has been historically under-distributed outside of North America and this is a global deal, so we can help them and they can help us build that fandom around the world," Sarandos said. "This should also add some fuel to our new and growing ad business."
Netflix launched a cheaper ad tier in October 2022, which has more than 23 million monthly active users.
"Our top ads priority is scale," said Netflix Co-CEO Greg Peters in Tuesday's earnings presentation.
Peters said Netflix had considered making ads the default experience for Netflix users but decided not to given the streamer's long history of not having ads. Amazon Prime Video this year rolled out ads, making it the default for customers to view ads and giving them the option to pay more to watch ad-free.
Netflix continued to lean into live events during the fourth quarter, hosting its first celebrity golf tournament, the Netflix Cup, which featured Formula One drivers and PGA Tour golfers. The company also launched a reality show called "Squid Game: The Challenge" based on its most popular Korean language series, "Squid Game."
Netflix continued to see strength in its non-English language shows, leaning into manga fandom with series including "Yu Yu Hakusho."
The company ended the year with almost 90 games, a relatively recent initiative for the streamer. A Netflix executive told The Times that the company was pleased with its progress and met the goals it had in 2023 around engagement. Netflix said engagement in games tripled last year.
On Monday, Netflix confirmed that its film chair, Scott Stuber, will be leaving in mid-March to start his own media company. After he leaves, his boss, Chief Content Officer Bela Bajaria, will fill the role until she finds Stuber's replacement.
Sarandos said on Tuesday that Netflix's movie strategy hasn't changed, adding its original films has helped Netflix differentiate itself from competitors. He pointed to recent original films such as the Julia Roberts thriller-drama "Leave the World Behind" and animated film "Leo" as successes.
Netflix said in its shareholder letter that it is logical to expect further consolidation among companies with large and declining linear networks, but said it is not a buyer. "We're not interested in acquiring linear assets," Netflix said.
"If we continue to execute well and drive continuous improvement — with a better slate, easier discovery and more fandom — while establishing ourselves in new areas like advertising and games, we believe we have a lot more room to grow," Netflix said in its letter.
