Los Gatos, CA – Netflix reported a strong first quarter performance, surpassing expectations with over 9 million new subscribers added during the quarter. The company’s revenue for the quarter was $9.37 billion, a 14.8% increase from the same period last year. Despite this positive news, the stock price fell over 3% in after-hours trading due to disappointing second quarter revenue guidance.
The significant subscriber additions of 9.3 million exceeded forecasts of 4.8 million, following the 13 million new additions in the previous quarter. Netflix also reported adding 1.7 million paying users in Q1 2023, showcasing steady growth in its user base.
One notable change is the company’s decision to discontinue reporting quarterly membership numbers and average revenue per member (ARM) starting next year. This move reflects Netflix’s strategic shift towards multiple pricing tiers tailored to different markets, each with varying business impacts.
In addition to subscriber growth, Netflix saw success in revenue initiatives such as cracking down on password sharing and introducing an ad-supported tier. These efforts, combined with recent price hikes on certain subscription plans, contributed to the revenue beat for the first quarter.
Looking ahead, Netflix’s second quarter revenue guidance of $9.49 billion fell slightly short of consensus estimates. However, the company remains optimistic about its long-term profitability, reporting strong operating margins of 28.1% for the first quarter, up from 21% a year ago.
The company’s earnings per share (EPS) also exceeded expectations, with Q1 EPS at $5.28 compared to consensus estimates of $4.52. Netflix anticipates second quarter EPS of $4.68, higher than the expected $4.54. These positive financial metrics demonstrate Netflix’s continued growth and financial stability.
Furthermore, Netflix’s free cash flow for the quarter came in at $2.14 billion, surpassing analyst predictions. The company also noted a 1% year-over-year increase in ARM, with expectations for further growth as the impact of the ad-supported tier and recent price hikes take effect later in the year.
Overall, Netflix’s performance in the first quarter reflects its resilience and adaptability in a rapidly changing streaming landscape. The company’s strategic shifts towards diversified pricing tiers and revenue initiatives have positioned it for sustained growth in the increasingly competitive streaming market.