Netflix Stock Price Soars After Earnings Report Record New Memberships

Netflix stock price (NASDAQ: NFLX) is up more than 13% in the after-hours following its release of the fourth-quarter earnings report for fiscal year 2024. The streaming company recorded a 16% increase in revenue year-over-year, reaching 19% on a foreign exchange (F/X) neutral basis, which the company says was driven by strong membership growth and advertising sales. The company also said that this performance came despite the challenges posed by a stronger US dollar.

New Memberships

In Q4, Netflix achieved its largest ever quarterly net addition of paid memberships, totaling 19 million, a notable increase from 13 million in Q4 2023 and 5 million in Q3 2024. In its shareholder letter, the company attributed this surge to strong content, better product-market fit across various regions, and "typical Q4 seasonality". Average paid memberships increased 15% year-over-year, with average revenue per membership (ARM) also seeing a 1% increase, or 3% on an F/X neutral basis.

Netflix Operating Income

Operating income for the fourth quarter reached $2.3 billion, a 52% increase from the previous year, while the operating margin increased to 22% from 17%. Earnings per share (EPS) more than doubled to $4.27 from $2.11 a year ago.

Netflix 2025 Forecast

Netflix has revised its 2025 revenue forecast to a range of $43.5-$44.5 billion, an increase of $0.5 billion from earlier estimates. The company says this update accounts for the positive impact of the strong Q4 results, although it acknowledges a $1 billion negative impact from the appreciating US dollar.

The company's 2025 revenue growth is projected at 12%-14% year-over-year, or 14%-17% on an F/X neutral basis, which the company says in its shareholder letter that it’s supported by continued membership growth and a projected doubling in advertising revenue. For the first quarter of 2025, revenue growth is anticipated to be 11% (14% F/X neutral), slightly below the full-year guidance due to timing of price changes and ads business seasonality.

The company plans to increase its operating margin target to 29% for 2025, up from a previous forecast of 28%. Starting with Q1 2025, Netflix said it will stop regular quarterly reporting of paid memberships and ARM, transitioning to bi-annual engagement reports from Q2 2025.

In Q4, Netflix’s ads plan was responsible for over 55% of sign-ups in the regions where it is offered. The company says it is rolling out an in-house ad tech platform to improve targeting and measurement capabilities, starting with the U.S. in April 2025.

For 2025, Netflix expects strong momentum with record net additions of 41 million in the past year, of which 19 million was in Q4, and a total revenue of $39 billion. Despite capturing only about 6% of the $650 billion entertainment market in the regions it operates, Netflix says it sees significant growth potential as streaming continues to expand globally. The company also says it remains focused on enhancing its product offerings, content variety, and pricing strategies, aiming to further solidify its leadership in the competitive entertainment landscape.

Netflix Past Performance

Using Stoculator's stock calculator, a $1,000 invested in Netflix 10 years ago would be worth $12,632.57 (as of January 22, 2025). That's an annual return rate of 29.87% with a total return of 1263.26%.

A $1,000 invested in Netflix 5 years ago would be worth $2,462.57 (as of January 22, 2025), assuming that the dividends were reinvested. That's an annual return rate of 19.76% and a total return rate of 146.26%.

You can use Stoculator's stock calculator to check the numbers for different periods and investment amounts.