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Netflix (NFLX) added 19 million members in Q4 2024, the largest quarterly gain in the company’s history and more than double Wall Street’s expectations.
The previous record was 16 million in Q1 2020—fueled by pandemic lockdowns. 👀
So, how did they pull it off? Let’s review.
Today at a glance:
Netflix Q4 FY24.
What caused the surge?
Key quotes from the earnings call.
What to watch looking forward.
1. Netflix Q4 FY24
Netflix's revenue growth depends on two main factors:
👨👩👧👦 Paid memberships: Number of users paying for the service.
💵 ARM (Average Revenue per Membership): How much revenue they generate per subscriber.
Total paid memberships grew 16% year-over-year and reached 302 million.
Netflix’s password-sharing crackdown since Q2 2023 fueled rapid member growth (see visual). But even after considering this tailwind, the Q4 surge was a massive outlier by historical standards.
Regional breakdown:
APAC: +4.9 million, the fastest-growing region, with members up 27% Y/Y (compared to mid-teens growth for all other regions).
LATAM: +4.1 million, bouncing back from a Q3 slowdown—as expected—with price changes and a stronger content slate.
EMEA: +5.0 million, mostly in line with last year’s Q4 net adds.
US/Canada: +4.8 million, far exceeding estimates of ~1.8 million, and impressive compared to the 2.8 million added in Q4 last year.
ARM grew 1% year-over-year or 3% in constant currency. The ad-supported plan continues to take a larger share of overall memberships, but ad monetization is still ramping up, which continues to weigh on ARM growth. For now, the growth is primarily member-based.
Income statement:
Revenue: $10.2 billion (+16% Y/Y) ($140 million beat).
Operating margin: 22% (+5pp Y/Y) (1pp beat).
EPS: $4.27 (+102% Y/Y) ($0.07 beat).
Cash flow (TTM):
Operating cash flow: $7.4 billion (19% margin, -3pp Y/Y).
Free cash flow: $6.9 billion (18% margin, -3pp Y/Y).
Balance sheet:
Cash and short-term investments: $9.6 billion.
Debt: $15.6 billion.
FY25 Guidance:
Revenue of $43.5-$44.5 billion or +12%-14% Y/Y ($0.5 billion raise).
Operating margin: 29% (+1pp Y/Y).
So what to make of all this?
Best quarter ever: Revenue, operating margin, and earnings all exceeded guidance. In constant currency, revenue growth was 19% Y/Y. The record new members could bring more upside later through price hikes and ad monetization, leading to a large guidance raise for FY25.
Strength in (fewer) numbers: Netflix will stop reporting subscriber counts, shifting focus to revenue and operating margin. This signals a maturing business model, where engagement and ad monetization—not raw subscriber growth—drive performance.
Ad tier is a major growth driver: Ad-supported memberships jumped 30% sequentially, with 55% of new sign-ups choosing the ad plan in available markets. Netflix is rolling out its first-party ad tech platform in the US this April—setting the stage for ad revenue to double in 2025.
Operating leverage is real: The margin expansion story remains intact, with a 29% FY25 target. Thanks to Netflix’s highly scalable model, revenue from new members flows through the P&L with minimal incremental costs—driving continued margin expansion.
Content remains king: The combination of original hits (Squid Game S2, Carry-On) and live events (NFL games on Christmas Day, Jake Paul vs. Myke Tyson) drove engagement to new highs. Netflix spent $17 billion on content in 2024 and plans to spend roughly $18 billion in 2025. The 2025 lineup is packed with blockbusters, including Squid Game S3, Stranger Things S5, Wednesday S2, and Knives Out 3.
Big picture: Netflix is entering 2025 with serious momentum. FY25 revenue guidance jumped by $1.5 billion after factoring in headwinds from a strengthening US dollar. The ads business is scaling fast, engagement is at an all-time high, and margins continue to expand.
2. What caused the surge
📺 Topping the charts
Netflix members vote with their time. No matter what you might think of the quality of specific programs, if people spend hours watching them, they are good for business.
Management often uses the proxy of Nielsen’s Top 10 view hours, where Netflix programs are prominently featured.
They highlighted in 2024:
The most streamed sporting event ever.
The two most streamed NFL games ever.
More #1 shows than all other streamers combined.
More view hours than all other streamers combined.
Six of the 10 most searched TV shows globally, in the US and the UK.
Squid Game S2 reached 166 million views in December, already enough to be the third most-watched TV season ever on Netflix. For context, the only two seasons doing better are Squid Game S1 (265M views) and Wednesday (252M views). Live events like the NFL games and the Paul vs. Tyson boxing match were massive subscriber magnets—further fueling the record quarter.
Top Q4 Shows:
Squid Games S2 (166M views).
Black Doves (47M views).
Outer Banks S4 (37M views).
Top Q4 Movies:
Carry-On (160M views).
Our Little Secret (84M views).
The Six Triple Eight (64M views).
Top Q4 Live Events:
Jake Paul vs. Mike Tyson (65M concurrent streams).
Beyonce Bowl (50M views).
Two NLF Christmas Day games (31M views).
The performance of the recent live events could set the tone for many more to come. There are 52 weeks of WWE programming scheduled for 2025, and Netflix already secured the US rights for FIFA’s Women’s World Cup in 2027 and 2031.
📢 Ads at scale
The ad plan is now the most popular for new members, making it a critical factor in the large member increase in Q4. After this week’s price hike in the US ($7.99/month for the ad plan and $17.99 for the standard plan), the price difference is even more compelling. Let’s recap the main Q4 insights about advertising:
The ad plan crossed 70 million members in November, just two years after its launch, and now nearly a quarter of all members globally.
The ad plan accounts for over 55% of sign-ups in available markets (compared to 50% in Q3 and 45% in Q2).
Ads tier memberships grew 30% quarter-over-quarter (up from 35% in Q3 FY24), showing continued momentum.
‘Extra Member with Ads’ will be a new option starting this week.
Netflix has taken full control of ad serving in Canada. Next up? A US rollout in April—giving advertisers better targeting, reporting, and measurement.
3. Key quotes from the earnings call
Co-CEO Greg Peters
On the drivers behind 19 million net adds:
“We had an incredible fight, two NFL games, we had one of our biggest TV series ever in Squid Games Season 2, all very successful events and titles that we are thrilled about.
Our estimates for subscriber adds driven by those titles combined represent a small minority of our total member acquisition in the quarter. So, it's really the whole service that's working that delivered the upside that we saw this quarter.”
The engagement from Q4 sign-ups aligned with past trends, suggesting these new members aren’t just here for a single show. While growth attribution is always subjective, the key takeaway is clear: new members drawn in by big releases tend to stick around just as long as any other cohort.
On the ad plan:
“View hours per member on the ads plan is similar to engagement on our standard non-ads plan in our ads country, which is a really good marker that we're excited about.“
Now that the ad-supported plan makes up the majority of new sign-ups, Netflix is virtually guaranteed to reach an enormous scale over time and increase its relevance for advertisers. Retention and engagement were the other unknown, and it looks like they’ll match the industry-high standard Netflix is known for. Now comes the second part: filling this growing inventory.
“We exceeded our ads revenue target in Q4, which was an exciting milestone to get. We doubled our ads revenue year-over-year last year. We expect to double it again this year.”
Building an ad platform isn’t rocket science once you have a large engaged audience. So, it should be only a matter of time before this side of the business becomes meaningful.
On the adtech built in-house:
“The biggest initial benefit we have of using our own ad server is just enabling us to offer more flexibility, more ways of buying for advertisers, fewer activation hurdles, just improving the overall buyer experience. […]. We're already seeing the impact of those benefits in the revenue growth in Canada.”
It’s a critical soundbite. If the new ad platform is boosting revenue growth through its testing phase in Canada, there is no reason it wouldn’t benefit other territories once it expands in 2025.
On games:
“We already see positive impacts in acquisition and retention from our game playing members. Now, those effects are relatively small currently, but frankly so is our investment in games relative to our overall content budget. And we're going to stay disciplined about scaling that investment as we see continued scaling and member benefits. […] We look forward to continuing to launch bigger and bigger games every year.”
In July 2024, former Epic Games’ EVP of game development Alain Tascan took the top job at Netflix’s game division, reporting to Greg Peters. Netflix has acquired a series of small studios like Night School and Boss Fight, but the initiative remains relatively small for now.
Co-CEO Ted Sarandos
On live sports:
“We are constantly trying to broaden our programming and live events […] It doesn't really change the underlying economics of full season big league sports being extremely challenging.”
The Christmas Day NFL games were the two most streamed ever, but it was first and foremost a once-a-year affair. The ROI would be hard to replicate with full-season coverage.
On WWE:
“WWE is off to a great start. Our first week, we drew about 5 million views, which is about two times the audience that Monday Night Raw was getting in linear television. Pretty consistent with how we modeled it, how we'd hope to build the audience for the league.”
The success with WWE is encouraging for future live-event initiatives and confirms the appetite across the streaming audience and the relevance for IP owners such as the UFC to secure deals with Netflix.
On being able to spend less on marketing:
“Netflix can talk to our members where they are, which is on Netflix, to tell them about a great new movie they're going to love. We have our social channels with over 1 billion subscribers that keep that conversation going.”
The movie Carry-On was able to reach 160 million views with very modest marketing, illustrating once more Netflix’s ability to capture the Zeitgeist by being the leading streaming platform alongside a savvy social media strategy.
4. What to watch looking forward
Management measures engagement via view hours per member. This metric has improved to 2 hours a day per paid membership in 2024, indicating a happy and engaged audience across all tiers.
Engagement bleeds into all performance metrics:
🔒 Retention (people keep coming back).
🗣️ Acquisition (word of mouth & awards).
💰 Monetization (price hikes & ad impressions).
According to Nielsen, streaming accounted for 43.3% of US TV Time in December, up from 35.9% a year ago and an all-time high.
Netflix accounted for 8.5% of US TV time in December (up from 7.7% a year ago)—nearly as much as Prime Video, Hulu, and Disney+ combined. However, market share can fluctuate based on live events and seasonality, and December benefited from the combination of Squid Games S2 and two Christmas Day NFL games.
YouTube increased its market share to 11.1% (up from 8.5% a year ago), excluding YouTube TV. While YouTube is taking an increasing share of US TV time, it hasn’t come at the expense of Netflix. Instead, it’s eating away at Cable, a segment now representing a 24% market share, down from 28% a year ago.
Netflix still commands less than 10% of TV viewing in every country—leaving massive room for growth. Management also estimates the entertainment market at $650 billion—for TV/streaming, theatrical, and gaming software (excluding China and Russia)—of which Netflix only captured ~6% in 2024.
Netflix’s biggest advantage? Laser focus.
Big tech is juggling multiple bets—from cloud infrastructure to AI to cutting-edge hardware.
Traditional entertainment giants are dealing with declining linear networks and mounting debt.
Meanwhile, Netflix stays locked in on what matters: delivering top-tier content and optimizing monetization. And it’s working. With 302 million members streaming 2 hours a day, the future looks bright.
Stay tuned for updates on other streaming giants in the coming weeks. 🍿
That’s it for today!
Stay healthy and invest on!
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Disclosure: I own NFLX, GOOG, AMZN, AAPL, and ROKU in App Economy Portfolio, where I share my ratings (BUY, SELL, or HOLD) with members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
Incredible read thank you for this