Instant Reaction: Netflix Posts Record Quarter
09:54 Share

Meta's open source AI, available to all, not just a few. Here's Brandon Mitchell, CEO of RightSea. We use Lama, Meta's free open source AI model, to build an AI tool that helps people get their dream job. Learn more at ai.meta.com slash open.

I'm Alpine skier, Michaela Schifrin. I've won the most World Cup ski races in history. But what does success mean to me? Success means discipline. It's teamwork. It's the drive and passion inside of us that comes before all recognition. And it's why Stiefel is one of the fastest growing global wealth management firms in the country. If you're looking for success, surround yourself with the people who will get you there. It's

At Stiefel, we invest everything into our advisors so they can invest everything into their clients. That means direct access to one of the industry's largest equity research franchises and a leading middle market investment bank. And it's why Stiefel has won the J.D. Power Award for Employee Advisor Satisfaction two years in a row.

If you're an advisor or investor, choose Stiefel. Where success meets success. Stiefel Nicholas & Company, Inc., member SIPC and NYSE. For J.D. Power 2024 award information, visit jdpower.com slash awards. Compensation provided for using, not obtaining the award.

Bloomberg Audio Studios. Podcasts. Radio. News.

They're projecting $2.94 billion. Analysts wanted to see $3.13 billion. First quarter operating margin expected to be 28.2%. Analysts wanted to see 29.8%. Maybe they're looking at the 2022 revenue overall and looking at the big number versus kind of the breakdown. Even revenue projections coming in light. First quarter EPS coming in light. Investors are shrugging that off. But they see 2025 revenue maybe a little bit better than what was initially expected.

So maybe that's the hope. I don't know. Let's see what Caroline Hyde has to say. She's co-host of Bloomberg Technology and she joins us now. Caroline, I mean, there's also the buyback in shares, but Netflix just soaring in the aftermarket. What a way to close out your subscriber numbers because this is the last time we ever get them. The last quarter of subscriber numbers.

an absolute blowout, as you say, coming in double where the expectations had been of 18 million. And they've added on net 41 million more people around the world over the course of this year. I mean, this is better than they did during 2020 in the onset of COVID when we were all suddenly trapped in our homes and had nothing else to do but to switch on and pay for net

extraordinary numbers. And I think, Carol, what you're saying is really pressing. The fact that they're looking to a full year that still looks so strong operating margin going to live up to 29%. I hear you, Tim, on the fiscal first quarter, perhaps looking a little bit light. But remember, this is a company that promised us the advertising

which has been slow to bear fruit, isn't actually going to give us a real substantial financial hit and oomph until 2026. But already you're seeing those dividends. Already you're seeing people pile into the advertising product. And thank you to Jake Paul, to Mike Tyson, to Beyonce, because this is where it's at. It seems to be live programming really winning it for them. Yeah, I was going to say no boxing matches or Beyonce happening

during the pandemic either. So maybe that's one of the big shifts. I do want to bring in Geetha Ranganathan, technology and media analyst for Bloomberg Intelligence. Just to repeat some of these headlines here, Netflix shares are soaring more than 10 percent. They boosted their 2025 revenue outlook.

They added $18.91 million, excuse me, net paid streaming users in the fourth quarter. Estimates were for 9.18, so more than doubling it there. Geetha, you've had about 10 minutes to look at these results. What jumps out to you? Yeah, everything really, everything what you just pointed out. You know, the one thing that we were worried about

coming into this quarter was whether they were going to take down their revenue expectations, just kind of given the strength and the dollar, but they actually boosted that. And, you know, you talked about the live sports being such a big part of this 18.9 million subscriber blowout. And it's going to be interesting to see how they go

ahead with both subscriber acquisition and retention. So they do have WWE programming that came on, you know, starting January of this year. And that's a really interesting retention strategy because you do have that programming kind of come in a week in and week out. And so it's going to be interesting to see how they kind of shape the conversation forward. The one big

thing that you know everybody was kind of looking at and you know we still haven't gotten any inkling about is the price hikes. So that's again another big positive lever that they have to pull sometime through this year especially kind of given that this is going to be their strongest ever

content pipeline year 2025 with all of their you know hit shows returning hey before we go back to caroline i have one question for you githa i mean this you know the live sports programming the live programming in general it's expensive isn't it so that's a lot of pressure that i mean netflix really has to make sure that they've got the eyeballs that make it pay off

It did pay off for them. So just let's just take the NFL, for instance. They spent about $75 million per game. We estimate that they brought in well over $100 million just in ad revenue. And then think of all of those additional subscribers that they got. So this is paying off for them big time. So they're making the content investments are definitely big, but they're pretty disciplined, Carol. And I think the ROI they're going to find is really, really good as well.

Hey, Caroline, to that point, Netflix, certainly the early mover when it comes to this, I think it's fair to say they certainly invented a category here. But since then, you've had companies like Max, Paramount, Peacock from NBC, Universal all come out with their own streaming products to much less success. Disney, of course, we've got to throw that one in there as well. What is Netflix doing so well that the other companies are not necessarily doing?

Very good point. And leaving them for dust. I mean, Geetha's numbers are so standout when you think about this is a company with 300 million subscribers worldwide, leaving Disney just way behind, less than half of what they've currently been able to crow about. But I think it's just the heady mix of being able to offer you the right content at the right time and the right price format.

making billion roads into latin america and into europe as well as into the united states which really surprised me was how strong the us and canada are in the face of those price hikes but i think most notably it is the fact that they keep on delivering whereas carry on is a great movie that people have flocked to whether it's these ongoing franchises that people cannot get enough of wednesdays coming out with more we're going to be getting a new stranger things these are people that are locked and loaded on these particular types of content and the genre that they feel so comfortable

And I wonder, and it's one more for Geetha really, is how much we're going to see cyclical nature of people signing on and signing off when it comes to sports. Because that is what is the behest and what has so been the issue for the likes of Warner Brothers and Disney is that you basically turn on when it's your season and then you switch off again and you have this huge jump start in numbers. Are we going to see that consistency when you do have the deals of Raw, for example? P.S. my producer Jackie absolutely loves the new Raw, so it seems as though they're winning on the WWE front.

Geetha, come on in on that. Talk to us about the cyclicality or not nature of sports.

Yeah, no, that's a great point that Caroline brought up. And we've seen that happen every time during football season, right? People just sign up for all these services. And then after the Super Bowl, you have so much of this, what is called churn and burn, right? But that's where I think Netflix is going to do things a little bit differently. So they're going to use a combination of these big splashy events. Think of, you know, Tyson versus Paul or even the NFL games where, you know, you can go out and acquire all this huge bunch of subscribers. And then you have

consistent weekly programming like WWE, the next thing that's really coming up for renewal is UFC, which is again, year round programming, which then forces people to come back week after week.

to watch their favorite shows. And I think that's how they're going to, they've always kind of strived for this nice mix, you know, whether it's English, non-English content, you know, whether it's licensed original content. And now it's going to be, you know, kind of this live sports, the one-off events versus, you know, that year-round programming. Geetha, before we let you go, you're an analyst for Bloomberg Intelligence. Yes.

You cover technology and media. You like having more data rather than less data. Unfortunately, you're going to get less data from Netflix moving forward because they're not going to report this customer metric anymore. What are you going to use to back out that figure? What should we be looking at?

Yeah, definitely. I mean, revenue is how they have been kind of training us. Revenue growth is going to be the big number going forward. It's going to be interesting to see if they give any metrics, Tim, around advertising at all, because we will kind of need that a little bit to see if that ad ARPU number is climbing up or not. But yeah, we're going to have to make some guesstimates in terms of subscriber numbers. But yes, revenue and operating margin, I think those are going to be the major metrics that investors are going to be focused on going forward.

Hey, before we go, Caroline, I did want to get you to weigh in on we are anticipating an announcement by President Trump on building artificial intelligence infrastructure here in the United States, a big joint venture. We've seen some stocks like Oracle move on it. What do we know or what might we expect?

It's so interesting, isn't it? Because it was about a few weeks ago that Masayoshi San was on stage with Trump congratulating him on his presidential win and promising $100 million into AI infrastructure. And here we get it, $100 million, maybe going up to $500 million with SoftBank, OpenAI, and Oracle. There are so many questions.

because what, Oracle's going to be stealing some of Microsoft's lunch here? Because remember, OpenAI tends to depend on Microsoft for its cloud infrastructure at the moment. But we understand from reporting of our own colleagues that there's been some frustration by OpenAI and Microsoft not being able to build out as quickly as enough.

as they would like and having to go elsewhere for their compute power, for their latest large language models. This is exactly what the president now wants to be laying out. Money coming in, particularly from foreign investment like SoftBank and committing to building infrastructure here in the United States. And remember, it's going to have to have the energy that goes alongside it. But big move for Oracle stock, big important cloud growth

for them, but also a really interesting tie-up between SoftBank, which has been taking more and more of a stake in OpenAI by buying up some of their shares on the private market and tender offers coming from employees, and indeed leaving me with questions about Microsoft. But we do anticipate that unveiling at the White House today.

All right. Looking forward to that. Great setup for us as we anticipate that. And great analysis from both of you when it comes to Netflix. We are watching the stock continuing to trade, soaring really in the aftermarket up about 11 percent as we speak. Our thanks to Caroline Hyde, co-host of Bloomberg Technology. And of course, Argeetha Ranganathan. She is technology media analyst for Bloomberg Intelligence. We'll all be reading her research.

Join Bloomberg in Chicago or via live stream on March 11th for the Future Investor, Finding the Opportunities. This 2025 event series will examine how companies are investing in their businesses to create efficiencies, innovating their products and services, and improving the customer experience. This series is proudly sponsored by Invesco QQQ. Register at BloombergLive.com slash Future Investor Chicago. That's BloombergLive.com slash Future Investor Chicago.