Netflix added 1.5 million paid subscribers in the U.S. during the fourth quarter, right in line with its estimates. But the company exceeded expectations globally.
In all, Netflix added 8.84 million new paid subscribers, ahead of the 7.6 million it was expecting. That growth was driven by 7.3 million new paid international subscribers. The company said its total subscriber growth was up 33% year over year and that for the full year, the 29 million total new subscribers it added was 33% more than the 22 million it added in 2017.
Netflix addressed the price increases it instituted in the U.S. this week and said that the increases will be rolled out to existing subscribers during the first and second quarters of 2019. The company didn’t say whether it expected the price increase to impact subscriber growth, but it did say it expects the new pricing to lift up the average selling price.
Looking ahead to the first quarter, Netflix said it expects to add 8.9 million new subscribers, up 8% year over year. That total represents 1.6 million new subscribers in the U.S. and 7.3 million internationally.
Netflix’s revenue for the fourth quarter approached $4.2 billion, up 27.4% year over year but operating income came in at $216 million bringing operating margins down to 5.2% compared to 7.5% one year ago. The company said the decline in margins was anticipated due to the high volume of titles launched during the fourth quarter while noting that full-year operating margins of 10% were on target.
Next quarter, Netflix is anticipating revenues will come close to $4.5 billion, up 21.4% year over year, while operating income will total $400 million and operating margins will reach 8.9%.
“Our paid membership growth is fairly consistent,” the company wrote. “Quarter over quarter, revenue growth varies due to factors like [foreign exchange] changes and timing of price changes across different markets. For example, we forecast Q1’19 international ASP will be up year over year, excluding [foreign exchange].”
The company said its multiyear plan is to continue expanding its content library while growing revenue faster to keep expanding operating margins.
As usual, Netflix addressed competitive threats in its letter to shareholders and said that often it is competing with and losing to “Fortnite” more than premium channel competitors like HBO.
“There are thousands of competitors in this highly fragmented market vying to entertain consumers and low barriers to entry for those with great experiences,” wrote Netflix. “Our growth is based on how good our experience is, compared to all the other screen time experiences from which consumers choose.”