Shares soared on Wednesday.
The streaming giant exceeded its fourth-quarter projections after the bell Tuesday reporting 8.5 million paid net additions for a full-year record total of 37 million paid memberships, a 31% increase compared to 28 million paid net adds in 2019.
Revenue for the fourth quarter came in at $6.64 billion, slightly higher than the company's original guidance forecast. In addition, Netflix reported a 24% year-over-year increase to $25 billion in annual revenue and a 76% operating profit increase to $4.6 billion.
"We’re enormously grateful that in these uniquely challenging times we’ve been able to provide our members around the world with a source of escape, connection and joy while continuing to build our business," Netflix said in its letter to shareholders.
Europe, the Middle East, and Africa accounted for 41% of Netflix's full-year paid net adds in 2020. The Asia Pacific Region was the second largest contributor to paid net additions with 9.3 million, up 65% year-over-year.
The company noted that season four of the critically acclaimed series "The Crown" saw the biggest growth in the show's viewership so far, with more than 100 million households now watching the show since its initial launch.
Other successful offerings include "Bridgerton," which Netflix said it will make a major announcement about this week, George Clooney's original film "Midnight Sky," which is estimated to be viewed by 72 million member households in its first four weeks of release. The animated film "Over the Moon," which has been viewed by 43 million member households and Robert Rodriguez's "We Can Be Heroes," which has been viewed by an estimated 53 million member households in its first four weeks were also cited as the service's big winners.
Netflix's holiday movie slate garnered high viewership, with 68 million member households choosing to watch "Holidate," starring Emma Roberts and 61 million member households watching "The Christmas Chronicles: Part Two," starring Kurt Russell. Another big holiday hit was the Portuguese film, "Just Another Christmas," with 26 million member households globally watching in its first 28 days of release.
Netflix's original series programming in 2020 accounted for all top 10 spots in Google's Year In Search. The hit series for 2020 include:
- "Tiger King"
- "Big Brother Brasil"
- "Money Heist"
- "Cobra Kai"
- "The Umbrella Academy"
- "Emily in Paris"
- "The Queen's Gambit"
- "Outer Banks"
- "Locke and Key"
"The Queen's Gambit" became Netflix's biggest limited series in history with 62 million member households watching in the show's first 28 days. Meanwhile, Netflix's original films "365 Dni" and "Enola Holmes" ranked #3 and #7 respectively on Google's top movies list for 2020.
Looking ahead at the first quarter of 2021, Netflix has over 500 titles that are currently in post-production or are preparing to launch on its service. The company plans to release at least one new original film every week in 2021.
In addition to the January releases of season three of "Cobra Kai" and the French heist series "Lupin," Netflix's first-quarter releases include "To All the Boys I've Loved Before 3," --- the finale to its beloved romantic comedy trilogy, the young adult drama "Fate: The Winx Saga," "Yes Day," starring Jennifer Garner, "Sky Rojo," a new thriller series from the creators of "Money Heist," and "Space Sweepers," an action-packed Korean sci-fi film.
The new subscriber numbers come amid fierce competition from Disney+, which has gained a total of 86.8 million subscribers since its launch in November 2019 and plans to release over 50 new projects in 2021.
In addition, Netflix faces a widening field of additional competitors including WarnerMedia's HBO Max, AppleTV+, NBCUniversal's Peacock, Discovery+ and ViacomCBS' rebranded streaming service set to launch on March 4, Paramount+.
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However, Netflix does not appear to be concerned, citing the past year being a 'testament' to the company’s approach of improving the platform for subscribers’ satisfaction to stand up to the competition.
"Our strategy is simple: if we can continue to improve Netflix every day to better delight our members, we can be their first choice for streaming entertainment," the company said.
Netflix expects 6 million new paid net additional subscribers in the first quarter of 2021 compared to 15.8 million a year ago. The company is also targeting a 20% operating margin, up two percentage points from 2020 and higher than its previous 19% forecast, due to a more favorable revenue outlook of $7.1 billion in the first quarter of 2021.
"As we said last quarter, we intend to continue to grow our operating margin each year at an average rate of three percentage points per year over any few-year period, but we anticipate some lumpiness," Netflix added. "Some years we’ll be a little over (like in 2020), some years a little under (like in 2021), but we are trying to keep on an average three percentage points per year long-term trajectory."
Netflix also said it is “very close” to achieving sustainable positive free cash flow and expects that it will no longer need to raise external financing for its day-to-day operations, citing its $8.2 billion in cash and $750 million undrawn credit facility. The company intends to maintain $10 billion to $15 billion in gross debt and will explore returning cash to shareholders through ongoing stock buybacks as it generates excess cash.
Going forward, Netflix will also provide an update on its long-term stock performance in each January investor letter.