In Q4 of 2022, Netflix reported a strong financial performance, exceeding their forecast in terms of revenue, operating profit, and membership growth. The streaming giant also reported that their Q4 content slate performed better than expected, with popular series such as Wednesday and Harry & Meghan, and films like Troll and Glass Onion: A Knives Out Mystery driving the success.
One of the notable achievements for Netflix was the successful launch of their new, lower-priced ad-supported plan in November, which reportedly yielded positive early results. Additionally, the company delivered on the high end of their operating profit margin target for the full year 2022 and expect to increase their operating margin in 2023 compared to 2022.
In terms of numbers, Netflix finished the year with 231 million paid memberships and generated $32 billion in revenue, $5.6 billion in operating income, $2 billion in net cash from operating activities, and $1.6 billion in free cash flow. The company also expects at least $3 billion in free cash flow in 2023, assuming no material swings in foreign exchange rates.
Another major development for the company was the announcement of the succession process, with Ted Sarandos and Greg Peters now serving as co-CEOs of Netflix, with Reed Hastings as Executive Chairman.
Netflix also provided an outlook for 2023, with fewer paid net adds expected in Q1’23 due to normal seasonality and strong member growth in Q4’22. The company also plans to roll out paid sharing more broadly later in Q1’23, which is expected to result in a different quarterly paid net adds pattern in 2023. Additionally, they expect improved overall revenue from paid sharing.
The company’s long-term financial objectives remain unchanged, with the aim to sustain double-digit revenue growth, expand operating margin, and deliver growing positive free cash flow. They expect constant currency revenue growth to accelerate over the course of the year, and operating profit growth and operating margin expansion for the full year. They also expect to deliver roughly 21%-22% operating margin for the full year.
