Netflix's shares soared upward on Wednesday morning.
Netflix's shares saw a significant surge on Wednesday, climbing as much as 14.9% and still up 11.1% as of 10:58 a.m. ET. The catalyst behind this impressive rise was the company's phenomenal financial results for the fourth quarter, surpassing investors' predictions by a substantial margin.
Netflix reported a steep increase in revenue, which soared by 16% to a staggering $10.2 billion. Moreover, the company's operating margin expanded by an impressive 530 basis points to hit 22.2%, resulting in an impressive 102% leap in diluted EPS to $4.27. This marked the first time Netflix generated over $10 billion in operating income in a single quarter, further fueling investor enthusiasm.
Analysts had forecasted earnings of $4.20 per share and revenue of $10.11 billion, leaving Netflix to comfortably surpass both expectations with ease.
In terms of subscribers, Netflix truly dazzled investors in the final quarter of 2024, adding an astounding 18.8 million new paid users, marking the biggest quarter of net adds in the company's history. This massive outperformance helped highlight the magnitude of Netflix's success, as the anticipated addition was only 9.2 million subs.
Looking ahead, Netflix is optimistic about its future, increasing its revenue guidance for 2025 to $44 billion (midpoint). The company has also raised its operating margin outlook to 29%, up from its previous estimate of 28%.
Management outlined several key drivers that will contribute to future growth, including a strong push towards creating original content, an expansion of its ad-supported tier, and an increased focus on live content.
Despite Netflix's impressive track record of strong results, its shares remain attractively priced at 36 times next year's expected earnings, given its remarkable 83% gain in 2023 and its consistent outperformance of market returns over the past three, five, and 10-year periods.
To summarize, Netflix’s robust performance during the fourth quarter of 2024 and management's optimistic outlook for 2025 indicate a continuation of the company's impressive growth trajectory. Focused on content investment, advertising expansion, and business diversification, Netflix aims to drive revenue and subscriber growth and maintain its market leadership position.
Investors eagerly poured money into Netflix's shares following its outstanding financial results, as the company's sophisticated finance strategy led to impressive earnings growth. The surge in revenue and diluted EPS significantly outperformed analysts' expectations, further strengthening investor confidence in the company's financial stability and growth potential.
