Netflix Inc. experienced a remarkable surge in their stock value, climbing approximately 14% during after-hours trading on Tuesday, and maintaining that rise in pre-market activities. This upswing follows the release of an optimistic forecast for the first quarter and revised expectations for fiscal 2025, backed by fourth-quarter earnings that surpassed market predictions, primarily due to achieving an unprecedented 19 million net additions in subscribers—the largest quarterly increase in the company’s history.
During an earnings call, Co-CEO, President, and Director, Gregory Peters, expressed confidence in the company’s long-term revenue potential. He noted, "Currently, we capture just 6% of the revenue opportunities within the countries and demographics we serve. However, by enhancing the diversity and quality of our TV and film offerings, and expanding with new content types, we are optimistic about progressively increasing our market share each year."
Looking forward, Netflix projects its first-quarter net income to reach $2.24 billion, translating to $5.58 per share, with an operating income of $2.94 billion and an operating margin of 28.2%, all marking an increase from the previous year. The company forecasts revenue at $10.416 billion, a year-over-year growth of 11.2%. This is slightly below the fiscal 2025 guidance due to factors like price adjustments and ad business seasonality. Adjusting for constant currency rates, the revenue would see a 14% boost.
Wall Street analysts, on average, expect Netflix to report earnings of $5.64 per share on revenues of $10.48 billion. Typically, these analyst projections do not account for extraordinary items.
For fiscal year 2025, Netflix is now aiming for revenues between $43.5 billion and $44.5 billion, marking a $0.5 billion increase from previous expectations. Analysts anticipate revenues of $43.52 billion for the year, equating to an annual growth rate of 12% to 14%, or 14% to 17% on a constant currency basis.
The operating margin forecast is now adjusted to 29%, up from an earlier projection of 28%. The revised guidance is attributed to enhanced business fundamentals and the benefits of a stronger-than-anticipated fourth-quarter performance.
Netflix's strategic priorities for fiscal 2025 involve bolstering its core operations by increasing the number of series and films, improving the user experience, growing its ad business, and exploring new ventures such as live programming and gaming.
In the fourth quarter, Netflix reported earnings of $1.87 billion, or $4.27 per share, a significant rise from last year’s $0.94 billion or $2.11 per share. This exceeded analyst expectations of $4.20 per share. Operating income surged 52% year-over-year to $2.27 billion, and operating margin rose to 22.2%, up from 16.9% the previous year.
Revenue for the quarter grew 16% to $10.247 billion, compared to $8.833 billion the previous year, and would have been 19% higher on a foreign exchange-neutral basis. Average paid memberships increased by 15%, and ARM (Average Revenue per Membership) climbed 1% year-over-year.
Global Streaming Paid Net Additions reached 18.91 million, compared to 13.12 million the previous year, and at the end of fiscal 2024, Global Streaming Paid Memberships totaled 301.63 million, up 15.9% from the prior year.
On Tuesday, Netflix shares closed at $869.68 on the Nasdaq, a 1.35% increase, and in the extended trading session, shares rose by 14.4%. In pre-market activity, shares traded at $994.64, reflecting a 14.37% increase.
