Netflix blows away expectations on subscriber numbers
Illustration of stock trading graph of Netflix seen on a smartphone screen.
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Netflix added millions more subscribers in the fourth quarter than Wall Street expected, helping to send shares of the streamer up after the bell despite a big earnings miss.
The company also disclosed that co-CEO Reed Hastings would be stepping down from his position and transitioning to the post of executive chairman. Greg Peters, the company’s chief operating officer has been promoted to co-CEO alongside the already established Ted Sarandos.
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Here are the results:
- EPS: 12 cents vs 45 cents per share, according to Refinitiv.
- Revenue: $7.85 billion $7.85 billion, according to Refinitiv survey.
- Global paid net subscribers: 7.66 million adds, compared to 4.57 million subscribers expected, according to StreetAccount estimates.
Netflix’s EPS missed largely due to a loss related to euro-denominated debt, but its margins of 7% still topped Wall Street’s expectations. The depreciation of the U.S. dollar compared to the euro during the fourth quarter isn’t an operational loss.
This is the first quarter that Netflix’s new ad-supported service is included in its earnings results. The company launched this cheaper tier in November, but has not disclosed what portion of the new subscriptions are from users who have opted for this service.
During the company’s prerecorded earnings call, Netflix said that it has seen comparable engagement from its new ad tier members as it has seen with its regular consumers. Additionally, it noted that it has not seen a significant number of people switching plans. So, those who subscribe to its premium and more expensive offerings are rarely bumping down to the cheaper ad-supported model.
“We wouldn’t be getting into this business if it couldn’t be a meaningful portion of our business,” said Spencer Neumann, the company’s chief financial officer, during the call. “We’re over $30 billion in revenue, almost $32 billion in revenue, in 2022 and we wouldn’t get into a business like this if we didn’t believe it could be bigger than at least 10% of our revenue.”
Last quarter, the streamer said it was “very optimistic” about its new advertising business. Going forward, Netflix will no longer give subscriber guidance, although it will still report those numbers in future earnings reports. The rationale is that the company is growing its focus on revenue as its primary top line metric instead of membership growth.
“2022 was a tough year, with a bumpy start but a brighter finish,” the company said in a statement. “We believe we have a clear path to reaccelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid sharing and building our ads offering. As always, our north stars remain pleasing our members and building even greater profitability over time.”
Netflix touted new releases like the television series “Wednesday,” the docuseries “Harry and Meghan” as well as Rian Johnson’s film “Glass Onion” as popular content during the quarter.
The company predicts that revenue growth in the first quarter 2023 will rise 4%, higher than the 3.7% Wall Street is currently projecting. Netflix says this growth will be driven by more paid memberships and more money per paid membership.
Additionally, the first quarter will mark Netflix’s preliminary roll out of its paid sharing program, which aims to make money from users who previously shared passwords with people outside their own homes.
The company said it expects some users who were borrowing accounts to stop watching programming on the platform, because they are not added as extra members to existing accounts or do not convert to paid members.
“However, we believe the pattern will be similar to what we’ve seen in Latin America, with engagement growing over time as we continue to deliver a great slate of programming and borrowers sign-up for their own accounts,” the company said.
An Electron rocket launches the Baby Come Back mission from New Zealand on July 17, 2023.
Rocket Lab
Rocket Lab stock soared 8% Monday, building on a strong run fueled by space innovation.
Shares of the space infrastructure company have nearly doubled over the last two months following a slew of successful launches and a deal with the European Union.
The stock is up 63% year to date after surging nearly sixfold in 2024.
Last month, Rocket Lab announced a partnership with the European Space Agency to launch satellites for constellation navigation before December.
Rocket Lab also announced the successful launch of its 66th, 67th and 68th Electron rockets in June. The company successfully deployed two rockets from the same site in 48 hours.
Rocket Lab competes with a growing list of companies in a maturing and increasingly competitive space industry with growing demand. Some of the main competitors in the sector include Elon Musk‘s SpaceX and Firefly Aerospace, which filed its prospectus to go public on Friday.
“For Electron, our little rocket, we’ve seen increased demand over the last couple of years and we’re not just launching single spacecraft — these are generally entire constellations for customers,” CEO Peter Beck told CNBC last month.
He said the company is producing a rocket every 15 days.
Beck, a New Zealand-native, founded the company in 2006. Since its debut on the Nasdaq in August 2021 through a merger with a special purpose acquisition company, the Long Beach, California-based company’s market value has swelled to more than $19 billion.
WATCH: Rocket Lab CEO Peter Beck: One thing I don’t worry about at night is demand
Technology
Anthropic, Google, OpenAI and xAI granted up to $200 million for AI work from Defense Department
A view of the Pentagon on December 13, 2024, in Washington, DC. Home to the US Defense Department, the Pentagon is one of the world’s largest office buildings.
Daniel Slim | Afp | Getty Images
The U.S. Department of Defense on Monday said it’s granting contract awards of up to $200 million for artificial intelligence development at Anthropic, Google, OpenAI and xAI.
The DoD’s Chief Digital and Artificial Intelligence Office said the awards will help the agency accelerate its adoption of “advanced AI capabilities to address critical national security challenges.” The companies will work to develop AI agents across several mission areas at the agency.
“The adoption of AI is transforming the Department’s ability to support our warfighters and maintain strategic advantage over our adversaries,” Doug Matty, the DoD’s chief digital and AI officer, said in a release.
Elon Musk’s xAI also announced Grok for Government on Monday, which is a suite of products that make the company’s models available to U.S. government customers. The products are available through the General Services Administration (GSA) schedule, which allows federal government departments, agencies, or offices to purchase them, according to a post on X.
OpenAI was previously awarded a year-long $200 million contract from the DoD in 2024, shortly after it said it would collaborate with defense technology startup Anduril to deploy advanced AI systems for “national security missions.”
In June, the company launched OpenAI for Government for U.S. federal, state, and local government workers.
WATCH: US needs an allied strategy for AI investment in military and defense: Palantir
Meta CEO Mark Zuckerberg appears at the Meta Connect event in Menlo Park, California, on Sept. 25, 2024.
David Paul Morris | Bloomberg | Getty Images
Meta CEO Mark Zuckerberg on Monday said he plans to invest “hundreds of billions of dollars” into artificial intelligence compute infrastructure, and that Meta plans to bring its first supercluster online next year.
A supercluster is a large, complex computing network that’s designed to train advanced AI models and handle their workloads.
“Meta Superintelligence Labs will have industry-leading levels of compute and by far the greatest compute per researcher,” Zuckerberg wrote in a Facebook post on Monday. “I’m looking forward to working with the top researchers to advance the frontier!”
Zuckerberg said Meta’s first supercluster is called Prometheus, and that the company is building several other multi-gigawatt clusters. One cluster, called Hyperion, will be able to scale up to five gigawatts over several years, he said.
Zuckerberg has been on a multibillion-dollar AI hiring spree in recent weeks, highlighted by a $14 billion investment in Scale AI. He announced a new organization in June called Meta Superintelligence Labs that’s made up of top AI researchers and engineers.
Zuckerberg had grown frustrated with Meta’s progress in AI, especially after the release of its Llama 4 AI models in April received a lukewarm response from developers. He is revamping Meta’s approach to better compete with rivals like OpenAI and Google.
“For our superintelligence effort, I’m focused on building the most elite and talent-dense team in the industry,” Zuckerberg wrote Monday.
WATCH: Meta announces several multi-gigawatt data centers, first planning to come online in 2026
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