Late on Tuesday, the streaming giant reported a net gain of 8.5mln new subscribers for its fourth quarter, a jump from the 2.2mln added in the third quarter and ahead of analyst estimates, taking its total number to 203.7mln.
The uptick in audience numbers also boosted revenues for the year to US$25bn, a rise of 24%, while operating profit surged 76% to US$4.6bn.
Netflix highlighted the popularity of a number of new releases of established series such as The Crown as well as new releases including Bridgerton as factors in driving the higher subscriber numbers in the final months of the year, adding that the amount of cash generated meant it no longer needed to raise external financing to fund its day-to-day operations.
News of the solid cash balance may come as a relief to investors, as Netflix has for years relied on large amounts of debt to finance its content creation strategy.
In a letter to shareholders reporting the results, Netflix said it has been moving “quickly” to grow and further strengthen its content library in order to address the new challenge from it said were “legacy competitors” such as Disney, which entered the streaming market last year with its own Disney+ offering that soared in popularity during lockdown.
Looking ahead, the company said it is targeting an operating profit margin of 20% for its 2021 financial year, higher than its previous forecast of 19%, due to what it said was a “more favourable revenue outlook”.
Netflix added that it is aiming to grow margins by three percentage points per year, although cautioned that they anticipated “some lumpiness” in achieving this target.
“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 said.
“Despite the growth being seen in the likes of Apple TV+, Disney+ as well as new channels like Discovery+, Netflix is still the market leader in the sector, and while it does trade at a premium price to its peers, it can justify this by way of a much richer content library, as well having a strong non-English content slate, which also sets it apart from its peers internationally”, said Michael Hewson at CMC Markets.
“It has a strong content slate with season 3 of Star Trek Discovery, season 4 of The Crown, and The Queens Gambit, while production has started on the fourth season of Stranger Things, which lands later this year. Disney+ and Apple TV+ may have bigger pockets and a cheaper price tag, but in terms of content in terms of TV and film they remain miles behind”, he continued.
Hewson added that the continued closure of cinemas during the pandemic was likely to keep Netflix’s subscriber numbers “fairly buoyant, with most attention on its international markets for future growth prospects”.
Netflix shares were up 13.3% at US$568 in pre-market trading in New York on Wednesday.