The biggest question on the mind of Netflix (NASDAQ:NFLX) management and investors was just how much of a drag the debut of new streaming services from Apple and Disney (NYSE:DIS) would be on the  giant's subscriber growth. Turns out the answer was: not that much.

Netflix reported the results of its fiscal 2019 fourth quarter after the market close on Tuesday, and as usual, all eyes were on the viewer numbers.

While U.S. subscriber growth fell about 180,000 short of the company's forecast, Netflix delivered more than 1.3 million more international subscriber additions than it expected, easily making up the shortfall.

A man with a sword gazing intently at the camera.

Image source: Netflix.

The halo effect

The additional subscribers had a positive impact all the way down Netflix's financial report. Revenue grew to $5.47 billion, up 30.6% year over year, and edging out both management's internal forecast of $5.44 billion and analysts' consensus estimates of $5.45 billion. Excluding the impact of foreign currency exchange rate fluctuations, revenue would have grown an even more impressive 33%. 

Netflix reported operating income of $459 million, more than double the $216 million it delivered in the prior-year quarter. This resulted in profits that came in far better than expected, with diluted earnings per share of $1.30, easily eclipsing the $0.51 forecast by management and the $0.53 expected by analysts. It was also up more than four-fold compared to the $0.30 in the prior-year quarter.

International streaming revenue grew 40% year over year, while domestic sales jumped 23%, driven higher by subscriber gains and price increases implemented earlier this year. The average revenue per user (ARPU) grew 9% year over year, or 12% excluding the impact of exchange rates.

Impact from Disney+

Overall, Netflix exceeded its subscriber guidance by a wide margin, adding 8.76 million net new subs, bringing the total to more than 167 million. But the devil is in the details.

Netflix missed its internal subscriber estimates for its domestic market, adding 420,000 subscribers, falling short of the 600,000 net adds it expected.

In its Q3 shareholder letter, Netflix outlined the uncertainty in its guidance, pointing to competition resulting in "modest headwinds to our near-term growth, which we have tried to factor into our guidance." 

Disney+ roared out of the gate in November, announcing the day after its launch that it had exceed 10 million signups, though it remains to be seen how many will remain after the trial period ends. During the video conference to discuss the results, Netflix CFO Spencer Neumann said the company saw "some elevated churn from pricing and competition."

International subscriber growth more than made up for the domestic miss, adding 8.33 million net new subscribers, much higher than the 7 million Netflix forecast.

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Image source: Getty Images.

Peak cash burn?

Netflix management addressed the company's ongoing cash burn, saying, "For the full year, FCF [free cash flow] was -$3.32 billion which we believe is the peak in our annual FCF deficit." Management reiterated its plan to "continually improve FCF each year and to move slowly toward FCF positive."

If management's estimates are correct, Netflix may have reached a tipping point, reaching peak cash burn during 2019.

A new look

Netflix also debuted a new reporting structure, breaking out its results into four geographical areas: UCAN (U.S. and Canada), EMEA (Europe, Middle East, and Africa), LATAM (Latin America), and APAC (Asia Pacific). The new construct revealed a few surprises.

The additional data showed that half of Netflix's growth during the quarter came from EMEA, which added more than 4.4 million new subscribers. APAC is the fastest growing region -- with growth of 53% year over year -- though from a much smaller base. At the same time, growth in Latin America -- one of the company's oldest international markets -- appears to be slowing, up 20% compared to the prior-year quarter.

All in all, the biggest takeaway from the company's fourth quarter report is that while competition has increased, Netflix's growth story is still intact. Investors celebrated by bidding up the stock by as much as 3% in after-hours trading.