Netflix Inc on Tuesday beat Wall Street earnings estimates for the first quarter but offered a lighter-than-expected forecast, demonstrating the challenges the streaming service faces in its pursuit of growth.
As per the company, it shifted a wider launch of a plan to crack down on unsanctioned password sharing into the second quarter to make improvements, delaying some financial benefits. However, it was pleased with the results so far. Revenue and earnings for the first quarter came in line with the average analyst estimates from Refinitiv. Earnings per share hit $2.88 with revenue of $8.162 billion. The clampdown on password sharing will begin in the United States during the current quarter, Netflix said.
“We are growing and we are profitable,” co-chief executive Ted Sarandos said in the company’s post-earnings video interview. “We have a clear path to accelerate growth in both revenue and profit, and we’re executing it.”
Shares of Netflix dropped as much as 11% in after-hours trade following the report but recovered to gain 1.4%. From January through March, Netflix added 1.75 million streaming subscribers, missing analyst estimates of 2.06 million additions.
“Netflix is a mature business reinforcing less reliance on subscriber growth. However, this metric still moves the needle for key stakeholders. The company began rolling out its solution for password-sharing – offering a “paid sharing” option – in 12 countries in February but is delaying expansion,” said Paolo Pescatore, analyst, PP Foresight while describing the first-quarter results.
Moreover, Netflix asserted it was on track to meet its full-year 2023 financial objectives.
For April through June, the company forecast $8.242 billion in revenue and $2.86 in diluted EPS. Wall Street had been projecting $8.476 billion for revenue and $3.05 for diluted EPS.
Netflix also is moving into live streaming. Netflix added nearly 9 million subscribers in 2022, half as many as the 18 million gained in the prior year, with much of that growth coming from Asia, according to research firm Moffett Nathanson. The gains it made in Asia and Latin America have impacted the average revenue per user, spurring Netflix to make changes to its business model, the firm said.
The company introduced a lower-priced version of its service with ads in 12 countries in the fourth quarter.