TradingKey - For most global investors, the focus has been on President Donald Trump’s first day back in the Oval Office in the US.
While there were a lot of policy reversals and rollbacks on the first day, the market was also dealing with the ongoing earnings season. One of the first large technology companies to report was streaming giant Netflix Inc (NASDAQ: NFLX).
The company came out with its Q4 2024 results on Tuesday (21 January) after the market closed in the US. Investors were no disappointed as the dominant streaming platform operator notched up its best ever subscription number ever for a single quarter.
As a result, Netflix stock soared 14% in after-hours trading. Here’s what investors need to know about Netflix’s latest blowout quarter.
Netflix subscriber growth shines, outlook solid
It was a quarter to write home about for Netflix as the company delivered a net gain of a whopping 18.9 million subscribers for Q4 2024, versus the guided projection for 9.8 million – nearly doubling the guide. This was on the back of a strong content slate and improved product/market fit across all regions, according to Netflix.
Management added that it was Netflix’s “biggest quarter of net adds in our history” and compares extremely favourably versus the 13 million for Q4 2023 and five million for Q3 2024. Ironically, this will also be the final quarter that Netflix is going to report quarterly subscriber numbers.
On the revenue side, Netflix posted sales of US$10.25 billion in Q4 2024, slightly above the company’s previous guide of US$10.1 billion for the quarter.
Revenue guidance from Netflix management was also robust with the company projecting full-year 2025 revenue to be in the range of US$43.5 billion and US$44.5 billion, translating into around 12% to 14% annual growth. The midpoint of that guided range was above the average analyst estimate of US$43.65 billion.
Netflix’s net subscriber adds hits record high in Q4 2024
Source: Bloomberg, company reports
Healthy operating margin projection
As Netflix management has always attested, investors should be focused on the operating margin of the company. And here, the data was positive too. While operating margin fell sequentially – to 22.2% in Q4 2024 – it was up more than 500 basis points from the 16.9% operating margin recorded for Q4 2023.
Netflix management added that it’s now targeting an ambitious 29% operating margin for the full-year 2025, which would be two percentage points higher than the 27% operating margin for the whole of 2024.
Operating income was also up strongly, rising 52% year-on-year in Q4 2024 to US$2.3 billion.
Top-notch content, ads tier rolls on
No doubt, Netflix’s solid earnings results were driven by the company’s strong content offering. According to the company, it had more No. 1 shows in the weekly Streaming Top 10 charts than all other streamers combined and also more shows in the weekly top 10 than all other streamers combined.
With the addition of live sports – such as the Jake Paul vs. Mike Tyson boxing match – and the launch of Season 2 of Squid Game, subscribers were keen to sign up.
On the ads front, Netflix said that its ads tier continues to allow the firm to offer a lower price point for consumers. Indeed, that ad tier accounted for over 55% of new sign-ups in Q4 2024 and membership on the ads plan expanded by nearly 30% quarter-on-quarter.
Bringing in cash
Overall, it was a brilliant final quarter of 2024 for Netflix. The company is now consistently bringing both operating and free cash flow.
For the whole of 2024, the company saw operating cash flow of US$7.4 billion and free cash flow of US$6.9 billion. Netflix also repurchased 9.2 million shares for around US$6.6 billion during the year.
If the streaming giant can continue posting both strong content and cash flow generation, it seems likely investors will be rewarded again at some point down the line.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
