Netflix CEO Reed Hastings split the company in two in 2011, thinking that the growing ubiquity of high-speed Internet access would soon mean the end of their disruptive DVD mailing business. But neglecting the DVD business proved to be a mistake, and Netflix reversed course.
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Shares of Netflix fluctuated in after-hours trading on Tuesday after the company reported fourth-quarter results. The company beat on the top and bottom lines for the quarter, but gave disappointing guidance for the first quarter.
Here are the key numbers:
- Earnings per share: $1.30 per share, however that’s not comparable to Refinitiv estimates
- Revenue: $5.47 billion vs. $5.45 billion expected, per Refinitiv
- Domestic paid subscriber additions: 550,000 vs. 589,000 expected, per FactSet estimates
- International paid subscriber additions: 8.3 million vs. 7.17 million expected, per FactSet
For the first quarter of 2020, Netflix expects to report earnings of $1.66 per share on revenue of $5.73 billion. That’s compared to analyst expectations for earnings of $1.20 per share and $5.76 billion in revenue.
The company reported negative free cash flow of $1.7 billion for the quarter and expects to see negative free cash flow of about $2.5 billion for 2020.
In the company’s letter to shareholders, Netflix cited recent price changes as a reason for low membership growth in the US and Canada, along with recent launches of rival streaming platforms. The company said it has seen a “more muted impact” from competitive launches outside the US.
“As always, we are working hard to improve our service to combat these factors and push net adds higher over time,” the company said.
Netflix included a chart of global Google search trends, comparing searches for its original series “The Witcher” with Apple’s “The Morning Show” and Disney’s “The Mandalorian.” The company said searches for “The Witcher” were much higher than its rivals, indicating high interest in its original shows. However, “The Mandalorian” isn’t available yet globally, making the chart slightly misleading.
The fourth quarter marks Netflix’s first earnings report since the launch of new rival streaming services last fall. Analysts will be paying close attention to see if Disney+ and Apple TV+, which launched last November, will have any impact on Netflix’s results.
The streaming wars are expected to heat up even further when AT&T‘s WarnerMedia launches HBO Max in May and Comcast‘s NBCUniversal rolls out Peacock in the U.S. on July 15. So far, Netflix has said it welcomes the new competition.
This story is developing. Check back for updates.
Disclosure: Peacock is the streaming service of NBCUniversal, parent company of CNBC. Comcast is the parent company of NBCUniversal.
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