Netflix Soars on Strong Q4 Results and Upbeat Outlook

Netflix (NFLX) has once again proven its dominance in the streaming market, reporting strong fourth-quarter results and an upbeat outlook for 2025. The company's stock soared on Wednesday, surging as much as 14.9% in after-hours trading following the release of its earnings report.

The streaming giant reported revenue that grew 16% to $10.2 billion, with operating margin increasing by 530 basis points to 22.2%. This resulted in diluted earnings per share (EPS) that soared 102% to $4.27, marking the first time Netflix generated $10 billion in operating income in a single quarter. These numbers handily beat analyst estimates, with consensus estimates calling for revenue of $10.11 billion and EPS of $4.20.

Netflix also reported record subscriber growth, adding nearly 19 million new paid users in the fourth quarter, the biggest quarter of net adds in the company's history. This impressive growth came despite the company's crackdown on password sharing and price increases in several regions. Wall Street had expected Netflix to add nearly 9.2 million subscribers, highlighting the magnitude of its outperformance.



Management also increased its guidance for 2025, forecasting revenue of $44 billion at the midpoint of its guidance and an operating margin outlook of 29%. This guidance reflects the company's confidence in its ongoing strong content push, continued expansion of its ad-supported tier, and increasing its live content push.

Netflix's ad-supported plan has been a major success, with 55% of sign-ups in countries with ad-supported options choosing these plans. Memberships on ad-supported plans climbed 30% sequentially, and ad revenue doubled in 2024, with management expecting to double it again in 2025. This growth in ad revenue, combined with the company's ability to increase prices while still robustly adding new memberships, puts Netflix in a strong position for continued growth.

Netflix's ability to increase prices while still robustly adding new memberships puts it in a strong position. The company has a very strong lineup for 2025, with new seasons of popular shows like Stranger Things, Wednesday, Squid Game, and Alice in Borderland. It also began broadcasting the WWE's popular Monday Night Raw, drawing in 5 million viewers for its first show. This content slate, along with the introduction of an option to add extra members to ad-supported subscriptions in 10 of the 12 countries where it offers such plans, should continue to boost Netflix's ad revenue and drive growth.

While Netflix's stock has nearly doubled over the past year, extending a winning streak that has made it one of the past decade's biggest winners, it remains a good stock to own over the long term. The company's strong financial performance, combined with its upbeat outlook and dominant position in the streaming market, makes it an attractive investment opportunity. However, investors should be cautious and monitor the company's progress closely, as the streaming market is highly competitive and subject to rapid change.

In conclusion, Netflix's strong fourth-quarter results and upbeat outlook for 2025 have driven its stock to new highs. The company's ability to increase prices while still robustly adding new memberships, combined with the success of its ad-supported plan and strong content lineup, positions it well for continued growth. While investors should remain cautious, Netflix's dominant position in the streaming market and strong financial performance make it an attractive long-term investment opportunity.