Updated at 10:8 am EST
Netflix (NFLX) - Get Free Report stock surged higher Friday after it posted weaker-than-expected fourth quarter earnings late Thursday, but added far more subscribers to its expanded streaming platform than Wall Street had forecast and said Reed Hastings would step-down as co-CEO to take on the role of executive chairman.
Netflix said profits for the three months ending in December were pegged at 12 cents per share, down sharply from the $1.33 per share earnings from the same period last year and well shy of the Street consensus forecast of 44 cents per share.
Group revenues, Netflix said, came in at $7.85 billion, up just 1.8% from last year and again shy of analysts' estimates of a $7.84 billion tally. The growth rate was the slowest, in fact, since the company went public in 2002.
Netflix added 7.66 million paid subscribers over the quarter, the company said, nearly double the Street forecast thanks to hits such as 'Wednesday', 'The Watcher'. 'Harry & Meghan' and 'Dahmer' drove north American gains. The better-than-expected additions, to a large extent, justified the group's move to include and ad-supported platform to its streaming service in November of last year.
Netflix, which no longer provides specific guidance on new subscriber additions, said its sees a "modest" increase in new additions, with earnings in the region of $2.82 per share and revenues of $8.17 billion.
"We’re working to give people more choice when it comes to price as well as greater control over their Netflix account. In November, we successfully launched our new, lower priced ad-supported plan in 12 countries," Netflix said. "We believe branded television advertising is a substantial long term incremental revenue and profit opportunity for Netflix, and our ability to stand up this business in six months underscores our commitment both to give members more choice and to reaccelerate our growth."
"While it’s still early days for ads and we have lots to do (in particular better targeting and measurement), we are pleased with our progress to date across every dimension: member experience, value to advertisers, and incremental contribution to our business."
Netflix shares were marked 6.3% higher in early Friday trading to change hands at $335.51 each, a move that extends the stock's six-month gain to around 55%.
Hastings, 62, has been with the group since it was founded in 1997 and is largely credited as the pioneer of online streaming entertainment. He will immediately assume the role of executive chairman and make way for current COO Greg Peters to join Ted Sarandos as co-CEO.
"Ted, Greg and I have been working closely together in different capacities for 15 years," said Hastings. "As is common in long, effective relationships, we’ve all learned how to bring out the best in each other. I look forward to working with them in this role for many years to come."
"Ted had the early foresight and skill to push into original programming, changing our trajectory as a company. He then moved quickly to expand into international originals, film, animation, and unscripted — bets that have helped broaden our content slate and which took courage given all the skepticism," Hastings said. "Greg has been instrumental in driving our partnerships, building and launching advertising, pushing us into deeper personalization, rebuilding our talent organization and helping to strengthen our culture."