Netflix Defies Wall Street Estimates After Adding More than 7 Million Subscribers

Netflix has defied Wall Street estimates after adding more than 7 million subscribers for the fourth quarter of 2022. This surge may offer an early indication that its decision to include advertisements for a less expensive subscription may continue to work in the long run, reported first by AP.

More Subscribers, New co-CEO

The firm announced on Thursday, Jan 19, that it added 7.7 million customers between October and December 2022. During this time, an ad-supported alternative for $7 per month was introduced.

Additionally, the business announced that co-CEO Reed Hastings would leave his position and take on the role of executive chairman. The company's COO, Greg Peters, was elevated to co-CEO with Ted Sarandos.

CNBC reports that the loss associated with the euro-denominated debt was a major factor in Netflix's EPS miss, but its margins of 7% are still above Wall Street's forecasts.

The new ad-supported service from Netflix is now included in the company's earnings figures for the first time. The business introduced this more affordable tier in November, but it has not said how many of the new subscriptions come from customers who selected this service.

The decline in subscribers from the previous year pushed Netflix to start using advertising.

The business is getting ready to put an end to the widespread password sharing that has allowed an estimated 100 million individuals globally to watch popular series and movies on the platform.

In its taped earnings call, Netflix stated that the engagement levels of its new ad tier users are on par with those of its regular customers, as per CNBC.

It also mentioned that it had not noticed a significant number of customers changing their plans. Therefore, customers of its premium and more pricey services rarely switch to the more affordable ad-supported model.

Touted Popular Series

Rian Johnson's feature "Glass Onion," the television series "Wednesday," the docuseries "Harry and Meghan," and other recent releases were cited by Netflix to have helped its subscribers surge.

Netflix forecasts that first-quarter revenue growth would increase by 4% rather than the 3.7% that Wall Street now anticipates. More paid memberships and higher revenue per paid membership, according to Netflix, will fuel this increase.

The first quarter will also see the initial rollout of Netflix's paid-sharing framework, which attempts to generate revenue from subscribers who have previously shared credentials with other people.

The business anticipates that the practice of letting someone borrow a Netflix account will cease since they will become paid members and not extra members to existing accounts through their new program.