Netflix Smashes Subscription Numbers in Q4 2024: Stock Pops 14%

TradingKeyJan 22, 2025 2:29 AM

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 not 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. Jake Paul-Mike Tyson boxing match and the NFL games may play the key role.

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

A graph with numbers and a line

AI-generated content may be incorrect.

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.

Quite a few promising titles are in the pipeline waiting to be released in 2025, with new seasons for Squid Games, Stranger Things and Wednesday.

TradingKey analyst Petar Petrov stated that although the NFL and boxing matches were one-off events, many subscribers who joined during that time remained on the platform, attracted by Netflix's strong content library, demonstrating successful cross-selling.

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.

Also, Netflix announced price hikes for most of their plans in the USA and Canada, which is normal, as they always increase prices after they release a successful title.

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.

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