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Netflix Whiffs on Fourth-Quarter Earnings, but Subscriber Growth Is Much Better Than Expected

By Eric Volkman - Updated Jan 19, 2021 at 6:59PM

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The company remains a go-to entertainment option thanks largely to its ever-refreshed slate of original content.

Netflix (NFLX -0.90%) fell short of profitability estimates in its most recent quarter, but investors were cheered by a dramatic, surprising jump in the streaming-video king's subscriber count.

In its results for the fourth quarter of fiscal 2020, which were published after market hours on Tuesday, the company announced that it booked revenue of $6.64 billion. That's a nearly 22% improvement year over year, and it slightly exceeded the average analyst estimate of $6.60 billion.

On the other hand, net income fell, sliding by nearly 8% to $542 million ($1.19 per share). Prognosticators following the stock had anticipated a per-share profit of $1.38.

Netflix HQ in Los Angeles.

Netflix headquarters in Los Gatos, California. Image source: Netflix.

But the most encouraging number for the quarter wasn't found in Netflix's financial statements. The company said its net subscriber additions came in at 8.5 million, bringing its overall tally to over 200 million. That was far higher than the company's expectation of only 6 million for the quarter.

Zooming out to the entirety of 2020, Netflix's net additions amounted to 37 million, setting a new record and topping 2019 adds by 31%. 

The company proffered limited guidance for its current quarter and year. For the latter, it's forecasting a 20% operating margin, which would beat last year's 18% and top the company's previous estimate of 19%.

It's clear from the fourth-quarter subscriber additions that Netflix is still a top option for those looking to stay entertained during the stay-at-home privations of the coronavirus pandemic. Its ever-growing slate of starry, proprietary content isn't cheap to finance, but it's helping retain existing viewers and attract new ones.

In after-hours trading Tuesday, Netflix shares were up by more than 12%. During the day, they more or less moved in concert with the S&P 500 index, with an 0.8% gain.


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