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Netflix Inc (NFLX.O) exceeded Wall Street earnings projections for the first quarter but provided a weaker-than-expected forecast on Tuesday, highlighting the difficulties the mature streaming service faces in its pursuit of growth.
The business said it delayed a larger rollout of a strategy to tighten down on unauthorized password sharing until the second quarter to make changes, delaying some financial gains, but it was satisfied with the results so far.
As the market for streaming video approaches saturation, the company is searching for alternative revenue streams, such as a password crackdown and a new ad-supported service.
Revenue and profitability for the first quarter were largely in line with Refinitiv’s average analyst predictions. Earnings per share reached $2.88 on $8.162 billion in revenue.
“We are growing and profitable,” stated Co-Chief Executive Ted Sarandos in a post-earnings video chat. “We have a clear path to accelerate growth in both revenue and profit, and we’re executing on it.”
Netflix shares fell as much as 11% in after-hours trading on the announcement but rebounded to gain 1.4%.
Netflix is a barometer for the streaming business, whose growth has slowed as competition has increased. Netflix attracted 1.75 million streaming subscribers from January to March, falling short of analyst expectations of 2.06 million additions.
PP Foresight analyst Paolo Pescatore assessed the first-quarter results as “mixed.”
“Netflix is a mature business that relies less on subscriber growth.” “However, for key stakeholders, this metric continues to move the needle,” he said. In February, the company began rolling out its password-sharing solution, which includes a “paid sharing” option, in 12 countries, but it is deferring further expansion.
“We believe it will result in a better outcome for our members and our business,” according to the corporation. Netflix also stated that it is “on track to meet our full-year 2023 financial objectives.”
According to Netflix, the crackdown on password sharing will begin in the United States during the current quarter. The business expects $8.242 billion in revenue and $2.86 in diluted EPS from April through June. Wall Street expected $8.476 billion in revenue and $3.05 in diluted earnings per share.
Netflix is also branching out into live streaming. On Sunday, the firm enraged viewers of the dating show “Love is Blind” by canceling a reunion special that was supposed to air live. According to Co-CEO Greg Peters, the mishap was caused by a “bug” that has since been resolved.
Netflix lost 200,000 members a year ago, its first fall in more than a decade, sending its stock tumbling and resetting Wall Street’s expectations for the industry.
According to research company MoffettNathanson, Netflix attracted about 9 million users in 2022, half as much as the 18 million gained the previous year, with much of that increase coming from Asia. The company’s achievements in Asia and Latin America have impacted its average revenue per user, prompting it to rethink its business strategy, according to the company.
In the fourth quarter, the company launched a lower-cost version of its service with adverts in 12 countries.
According to UBS media analyst John Hodulik, the crackdown on password sharing might fuel Netflix’s budding advertising business by driving these “sharers” to the lower-priced version of the service.
Sarandos stated that Netflix hopes Hollywood studios can reach a “fair and equitable” deal with writers to avoid a strike, but he also stated that the firm has access to programs from around the world that it can supply if production in the United States is disrupted.
Dawn Chmielewski and Lisa Richwine in Los Angeles contributed reporting. Peter Henderson and Matthew Lewis edited the piece.
