Instant Reaction: Netflix Posts Record Quarter

Bloomberg Audio Studios, podcasts, radio news, Netflix shares soaring after 0:00:10.000 --> 0:00:12.479 they boosted their revenue out look. Carol, One thing that's 0:00:12.560 --> 0:00:15.239 kind of surprising to me, which part is the first 0:00:15.360 --> 0:00:18.279 quarter outlook doesn't seem to be affecting the way the 0:00:18.280 --> 0:00:22.440 stock is moving. First quarter operating income therefore projecting two 0:00:22.480 --> 0:00:24.560 point nine to four billion, analysts wanted to see three 0:00:24.560 --> 0:00:28.560 point one three billion dollars. First quarter operating margin expected 0:00:28.600 --> 0:00:30.520 to be twenty eight point two percent. Analysts wanted to 0:00:30.560 --> 0:00:32.280 see twenty nine zero point eight percent. 0:00:32.320 --> 0:00:34.560 Maybe they're looking at the twenty twenty two revenue overall 0:00:34.600 --> 0:00:37.159 and looking at the big number versus kind of the breakdown. 0:00:37.159 --> 0:00:40.680 See revenue projections coming in light, first quarter EPs coming 0:00:40.680 --> 0:00:42.560 in light. I guess you are shrugging that off. 0:00:42.600 --> 0:00:45.040 But they see twenty twenty five revenue maybe a little 0:00:45.040 --> 0:00:47.880 bit better than what was initially expected. So maybe that's 0:00:47.960 --> 0:00:48.600 the hope. 0:00:48.680 --> 0:00:49.000 I don't know. 0:00:49.040 --> 0:00:50.920 Let's see what Caroline Hind has to say. She's co 0:00:50.960 --> 0:00:54.920 host of Bloomberg Technology and she joins us. Now, Caroline, 0:00:55.040 --> 0:00:58.560 I mean, there's also the buyback in shares. But Netflix 0:00:58.680 --> 0:00:59.920 just soaring in the aftermark. 0:01:01.280 --> 0:01:03.880 What a way to close out your subscriber numbers, because 0:01:03.880 --> 0:01:05.399 this is the last time we ever get them. The 0:01:05.480 --> 0:01:09.360 last quarter of subscriber numbers an absolute blowout, as you say, 0:01:09.360 --> 0:01:12.760 coming in double where the expectations have been of eighteen million, 0:01:12.760 --> 0:01:16.000 and they've added an on net forty one million. 0:01:16.040 --> 0:01:18.759 More people around the world over the course of this year. 0:01:18.840 --> 0:01:21.319 I mean, this is better than they did during twenty 0:01:21.400 --> 0:01:23.960 twenty in the onset of COVID, when we were all 0:01:24.000 --> 0:01:25.880 suddenly trapped in our homes and had nothing else to. 0:01:25.840 --> 0:01:28.440 Do but to switch on and pay for Netflix. 0:01:28.760 --> 0:01:30.920 Extraordinary numbers, And I think, Carol, what you're saying is 0:01:30.959 --> 0:01:33.440 really president the fact that they're looking to a full 0:01:33.560 --> 0:01:36.400 year that still looks so strong. Operating margin going to 0:01:36.400 --> 0:01:38.480 live up to twenty nine percent. I hear you, Tim 0:01:38.680 --> 0:01:41.039 on the fiscal first quarter perhaps looking a little bit light. 0:01:41.280 --> 0:01:43.920 But remember this is a company that promised us for advertising, 0:01:44.160 --> 0:01:45.720 which has been slow to bear fruit. 0:01:46.040 --> 0:01:47.160 Isn't actually going to give. 0:01:47.080 --> 0:01:50.960 Us a real substantiate and financial hit and oop until 0:01:51.000 --> 0:01:51.960 twenty twenty six. 0:01:52.240 --> 0:01:53.480 But already you're seeing. 0:01:53.240 --> 0:01:56.400 Those dividends, Already you're seeing people pile into the advertising product. 0:01:56.640 --> 0:01:59.520 And thank you to j Paul, to Mike Tyson, to 0:01:59.560 --> 0:02:01.560 be on because this is where it's at. 0:02:01.600 --> 0:02:03.600 It seems to be live programming. What are you winning 0:02:03.600 --> 0:02:03.800 it for? 0:02:03.920 --> 0:02:06.120 Yeah, I was gonna say no boxing matches or Beyonce 0:02:06.560 --> 0:02:09.400 happening during the pandemic either. So maybe that's one of 0:02:09.400 --> 0:02:10.920 the big shifts. Someone, do you want to bring in? 0:02:11.000 --> 0:02:15.200 Getha ranganathen technology and media analysts for Bloomberg Intelligence. Just 0:02:15.240 --> 0:02:17.919 to repeat some of these headlines here, Netflix shares are 0:02:17.960 --> 0:02:20.120 soaring more than a ten percent. They boosted their twenty 0:02:20.160 --> 0:02:24.200 twenty five revenue outlook. They added eighteen point nine one 0:02:24.200 --> 0:02:27.320 million dollars a million excuse me, net paid streaming users 0:02:27.320 --> 0:02:29.720 in the fourth quarter. Estimates were for nine point one 0:02:29.720 --> 0:02:32.919 point eight so more than doubling it there, Githa, You've 0:02:32.919 --> 0:02:35.440 had about ten minutes to look at these results. What 0:02:35.560 --> 0:02:36.240 jumps out to you? 0:02:37.760 --> 0:02:38.000 Yeah? 0:02:38.040 --> 0:02:40.240 Everything? Really everything what you just pointed out. You know, 0:02:40.320 --> 0:02:43.040 the one thing that we were worried about coming into 0:02:43.040 --> 0:02:45.080 this quarter was whether they were going to take down 0:02:45.160 --> 0:02:47.519 their revenue expectations just kind of given the strength and 0:02:47.560 --> 0:02:50.280 the dollar, but they actually boosted that and you know, 0:02:50.320 --> 0:02:52.520 you talked about the live sports being such a big 0:02:52.560 --> 0:02:56.320 part of this eighteen point nine million subscriber blowout, and 0:02:56.320 --> 0:02:58.440 it's going to be interesting to see how they go 0:02:58.760 --> 0:03:02.160 ahead with both criber acquisition and retention. So they do 0:03:02.280 --> 0:03:06.480 have WWE programming that came on, you know, starting January 0:03:06.520 --> 0:03:10.040 of this year, and that's a really interesting retention strategy 0:03:10.040 --> 0:03:12.600 because you do do have that programming kind of come 0:03:12.600 --> 0:03:14.640 in a week in and week out, and so it's 0:03:14.680 --> 0:03:16.079 going to be interesting to see how they kind of 0:03:16.080 --> 0:03:19.200 shape the conversation forward. The one big thing that you know, 0:03:19.600 --> 0:03:22.000 everybody was kind of looking at and you know, we 0:03:22.080 --> 0:03:25.720 still haven't gotten any inkling about is the price hikes. 0:03:25.760 --> 0:03:28.959 So that's again another big positive lever that they have 0:03:29.080 --> 0:03:32.360 to pull sometime through this year, especially kind of given 0:03:32.400 --> 0:03:35.560 that this is going to be their strongest ever content 0:03:35.720 --> 0:03:38.680 pipeline year twenty twenty five with all of their you know, 0:03:38.920 --> 0:03:40.080 hit shows returning. 0:03:40.240 --> 0:03:41.800 Hey, before we go back to Caroline, I have one 0:03:41.880 --> 0:03:44.920 question for you, Geita. I mean this, you know, the 0:03:44.960 --> 0:03:48.840 live sports programming, the live programming in general, it's expensive, 0:03:48.960 --> 0:03:50.880 isn't it. So that's a lot of pressure that I mean, 0:03:51.000 --> 0:03:54.920 Netflix really has to make sure that they've got the 0:03:54.960 --> 0:03:56.440 eyeballs that make it pay off. 0:03:57.720 --> 0:03:59.640 It did pay off for them, so just let's just 0:03:59.680 --> 0:04:02.680 take the NFL for instance, they spent about seventy five 0:04:02.760 --> 0:04:06.480 million dollars per game. We estimate that they brought in 0:04:06.560 --> 0:04:09.640 well over one hundred million just an AD revenue, and 0:04:09.680 --> 0:04:12.480 then think of all of those additional subscribers that they got. 0:04:12.520 --> 0:04:14.280 So this is paying off for them big time. So 0:04:14.320 --> 0:04:17.039 they're making it. The content investments are definitely big, but 0:04:17.080 --> 0:04:20.920 they're pretty disciplined, Carol, and I think the ROI they're 0:04:20.920 --> 0:04:22.560 going to find is really really good as well. 0:04:22.720 --> 0:04:26.360 Hey, Carolyn, to that point, Netflix certainly the early mover 0:04:26.440 --> 0:04:27.800 when it comes to this. I think it's fair to 0:04:27.839 --> 0:04:31.159 say they certainly invented a category here. But since then 0:04:31.600 --> 0:04:38.080 you've had companies like Max, Paramount, Peacock from NBC Universal 0:04:38.400 --> 0:04:40.839 all come out with their own streaming products to much 0:04:40.920 --> 0:04:43.360 less success. Disney, of course, we've got to throw that 0:04:43.400 --> 0:04:46.919 one in there as well. What is Netflix doing so 0:04:47.040 --> 0:04:50.680 well that the other companies are not necessarily doing. 0:04:52.279 --> 0:04:54.320 Very good? Point and leaving them the dust. 0:04:54.360 --> 0:04:56.719 I mean, Leatha's numbers is so stand out when you 0:04:56.720 --> 0:04:59.080 think about this is a company with three hundred million 0:04:59.400 --> 0:05:03.920 subscribers worldwide, leaving Disney just way behind, less than half 0:05:04.160 --> 0:05:06.680 of what they've currently been able to crow about. 0:05:06.839 --> 0:05:09.160 But I think it's just the heavy mix. 0:05:09.000 --> 0:05:11.320 Of being able to offer you the right content at 0:05:11.360 --> 0:05:13.599 the right time and the right price format. They're making 0:05:13.600 --> 0:05:16.200 big inroads into Latin America and into Europe as well 0:05:16.200 --> 0:05:17.200 as into the United States. 0:05:17.200 --> 0:05:18.560 Which really surprised me. 0:05:18.560 --> 0:05:20.599 Was how strong the US and Canada are in the 0:05:20.640 --> 0:05:23.159 face of those price heights. But I think most notably 0:05:23.160 --> 0:05:25.120 it is the fact that they keep on delivering, whereas 0:05:25.160 --> 0:05:27.440 it's carry On is a great movie that people have 0:05:27.440 --> 0:05:31.119 flocked to, whether it's these ongoing franchises that people cannot 0:05:31.120 --> 0:05:33.760 get enough of Wednesdays coming out with more, we're going 0:05:33.800 --> 0:05:34.480 to be getting. 0:05:34.200 --> 0:05:35.239 A new stranger things. 0:05:35.279 --> 0:05:38.160 These are people that a lot loaded on these particular 0:05:38.200 --> 0:05:40.200 types of content and the genre that they feel so 0:05:40.240 --> 0:05:43.080 comfortable with. And I wonder, and it's one more for 0:05:43.120 --> 0:05:46.240 Geetha really is how much we're going to see cyclical 0:05:46.320 --> 0:05:46.840 nature of. 0:05:46.760 --> 0:05:49.040 People signing on and signing off when it comes to sports, 0:05:49.080 --> 0:05:49.680 because that is. 0:05:49.640 --> 0:05:51.719 What is that the behest and what has so been 0:05:51.720 --> 0:05:53.839 the issue for the likes of Warner Brothers and Disney 0:05:54.200 --> 0:05:56.480 is that you basically turn on when it's your season 0:05:56.480 --> 0:05:57.479 and then you switch. 0:05:57.160 --> 0:05:59.960 Off again and you have this huge jump starts in numbers. 0:06:00.240 --> 0:06:02.080 All were going to see that consistency when you do 0:06:02.160 --> 0:06:04.839 have the deals of rule for example, ps my producer 0:06:04.880 --> 0:06:06.320 Jackie absolutely loves. 0:06:06.120 --> 0:06:08.240 The new role. So ass you say they're winning on 0:06:08.240 --> 0:06:10.320 the WWE front, Keitha. 0:06:10.040 --> 0:06:11.560 Come on in on that talk to us about the 0:06:11.560 --> 0:06:15.800 cyclical cyclicality or not nature of sports. 0:06:16.560 --> 0:06:16.800 Yeah. 0:06:16.880 --> 0:06:19.200 No, that's a great point that Caroline brought up, and 0:06:19.200 --> 0:06:21.919 we've seen that happen every time during football season, right, 0:06:21.960 --> 0:06:24.160 people just sign up for all these services and then 0:06:24.240 --> 0:06:25.960 after the Super Bowl you have so much of this 0:06:26.279 --> 0:06:27.520 what is called churn and burned. 0:06:27.560 --> 0:06:27.720 Right. 0:06:28.000 --> 0:06:29.520 But that's where I think Netflix is going to do 0:06:29.560 --> 0:06:31.160 things a little bit differently. So they're going to use 0:06:31.200 --> 0:06:33.960 a combination of these big, splashy events think of you know, 0:06:34.040 --> 0:06:38.320 Tyson versus Paul or even the NFL games where you know, 0:06:38.320 --> 0:06:40.440 you can go out and acquire all this huge bunch 0:06:40.480 --> 0:06:44.200 of subscribers, and then you have you know, consistent weekly 0:06:44.320 --> 0:06:47.560 programming like WWE. The next thing that's really coming up 0:06:47.600 --> 0:06:51.240 for renewal is UFC, which is again year round programming, 0:06:51.360 --> 0:06:54.040 which then you know, forces people to come back week 0:06:54.120 --> 0:06:57.360 after week to watch their favorite shows, and I think 0:06:57.360 --> 0:06:59.960 that's how they're going to They've always kind of strived 0:07:00.279 --> 0:07:03.040 for this nice mix, you know, whether it's English non 0:07:03.080 --> 0:07:06.400 English content, you know, whether it's licensed original content, and 0:07:06.400 --> 0:07:07.760 now it's going to be you know, kind of this 0:07:07.880 --> 0:07:11.080 live sports, the one off events versus you know that 0:07:11.200 --> 0:07:12.200 year round programming. 0:07:12.600 --> 0:07:15.840 Githa, before we let you go, you're an analyst for 0:07:15.920 --> 0:07:20.960 Bloomberg Intelligence. You cover technology and media. You like having 0:07:21.040 --> 0:07:24.120 more data rather than less data. Unfortunately, you're going to 0:07:24.120 --> 0:07:27.800 get less data from Netflix moving forward because they're not 0:07:27.920 --> 0:07:30.960 going to report this customer metric anymore. What are you 0:07:31.000 --> 0:07:33.000 going to use to back out that figure? What should 0:07:33.040 --> 0:07:33.760 we be looking at? 0:07:34.960 --> 0:07:37.680 Yeah, definitely, I mean revenue is how they have been 0:07:37.760 --> 0:07:39.920 kind of training as revenue growth is going to be 0:07:40.000 --> 0:07:42.320 the big number going forward. It's going to be interesting 0:07:42.360 --> 0:07:45.880 to see if they give any metrics tim around advertising 0:07:45.920 --> 0:07:47.880 at all, because we will kind of need that a 0:07:47.880 --> 0:07:50.600 little bit to see if that add our poo number 0:07:50.720 --> 0:07:53.000 is climbing up or not. But yeah, we're going to 0:07:53.000 --> 0:07:55.720 have to make some guestimates in terms of subscriber numbers. 0:07:56.040 --> 0:07:58.480 But yes, revenue and operating margin, I think those are 0:07:58.520 --> 0:08:00.840 going to be the major metrics that investors are going 0:08:00.880 --> 0:08:02.200 to be focused on going forward. 0:08:02.560 --> 0:08:05.360 Hey, before we go, Caroline, I did want to get 0:08:05.360 --> 0:08:08.640 you to weigh in on We are anticipating an announcement 0:08:08.960 --> 0:08:13.320 by President Trump and building artificial intelligence infrastructure here in 0:08:13.320 --> 0:08:15.480 the United State. It's a big joint venture. We've seen 0:08:15.840 --> 0:08:17.840 some stacks like Oracle move on it. What do we 0:08:17.920 --> 0:08:19.520 know or what might we expect? 0:08:20.560 --> 0:08:21.480 It's so interesting, isn't it? 0:08:21.520 --> 0:08:23.720 Because it was but a few weeks ago that Masayoshi's 0:08:23.720 --> 0:08:26.120 son was on stage with Trump congratulating him on his 0:08:26.160 --> 0:08:30.240 presidential win and promising one hundred million dollars into AI infrastructure. 0:08:30.240 --> 0:08:32.200 And here we get it, one hundred million maybe going 0:08:32.280 --> 0:08:34.840 up to five hundred million dollars with soft Bank, open 0:08:34.880 --> 0:08:37.920 Ai and Oracle. There are so many questions here because 0:08:38.200 --> 0:08:40.559 what Oracle is going to be stealing some of Microsoft's 0:08:40.600 --> 0:08:43.040 lunch here? Because remember open Ai tends to depend on 0:08:43.080 --> 0:08:46.080 Microsoft for its cloud infrastructure at the moment. But we 0:08:46.200 --> 0:08:49.040 understand from reporting of our own colleagues that there's been 0:08:49.040 --> 0:08:51.680 some frustration by open Ai and Microsoft not being able 0:08:51.679 --> 0:08:53.600 to build out as quickly as enough as they would 0:08:53.679 --> 0:08:56.199 like and having to go elsewhere for their compute power 0:08:56.240 --> 0:08:59.080 for their latest large language models. This is exactly what 0:08:59.240 --> 0:09:02.400 the President now wants to be laying out money coming in, 0:09:02.440 --> 0:09:06.000 particularly from the foreign investment like SoftBank, and committing to 0:09:06.120 --> 0:09:08.880 building infrastructure here in the United States, and remember it's 0:09:08.920 --> 0:09:11.640 going to have to have the energy that goes alongside it. 0:09:11.679 --> 0:09:14.840 But big move for Oracle Stock, big important cloud growth 0:09:15.120 --> 0:09:18.320 driver for them. But also really interesting tie up between SoftBank, 0:09:18.360 --> 0:09:19.959 which has been taking more and more of a stake 0:09:20.080 --> 0:09:22.720 in open Ai by buying up some of those shares 0:09:22.720 --> 0:09:25.760 on the private market and tender office coming from employees 0:09:26.120 --> 0:09:29.160 and indeed leaving me with questions about Microsoft. But we 0:09:29.200 --> 0:09:31.679 do anticipate that unveiling at the White House today. 0:09:31.480 --> 0:09:33.559 All right, looking forward to that great setup for us 0:09:33.840 --> 0:09:36.720 as we anticipate that in great analysis from both of you. 0:09:36.800 --> 0:09:38.959 When it comes to Netflix, we are watching the stock 0:09:39.280 --> 0:09:42.680 continuing to trade soaring really in the aftermarket, up about 0:09:42.720 --> 0:09:45.600 eleven percent as we speak. Our thanks to Caroline High, 0:09:45.679 --> 0:09:48.360 co host of Bloomberg Technology, and of course our Githa 0:09:48.440 --> 0:09:50.480 Rang andath On. She is technology and media analyst for 0:09:50.520 --> 0:09:53.400 Bloomberg Intelligence. We'll all be reading her research