Netflix got off to a slow start to the year, missing Wall Street estimates after adding only 1.75 million customers in the first quarter and stoking concerns about the future of the world’s most popular TV network. Investors were expecting 2.41 million new customers.
Netflix also predicted onTuesdaythat it will generate lower sales and profit in the current quarter than what analysts forecast. The company delayed its plan to crack down on password sharing in the US. It sees new customers in the current period as “roughly similar” to the first quarter.
Shares of Netflix fell as much as 12% to $294.80 in extended trading after the results were announced.
This is the second year in a row where Netflix has gotten off to a shaky start. Shares of Netflix have slipped more than 50% from their high in November 2021 as the company has gone from a high-flying phenom to a middle-aged star searching for its next big hit. The streaming service lost customers in the first half of 2022 and added fewer than 9 million customers for the full 12 months, its slowest pace since 2011, the year it split its streaming service from its DVD-by-mail business.
Netflix said Tuesday it is shutting down its DVD delivery operation, ending its original business after a 25-year run. The company cited the cost of operating it after years of seeking customers move online.
The streaming industry pioneer has responded to its slowing growth by introducing two new initiatives: an advertising-supported tier and a plan to crack down on password sharing. The company estimates that more than 100 million people use a Netflix account for which they don’t pay.
The company has been testing ways of charging customers for sharing accounts in Latin America, and rolled out plans in four territories in the first quarter. It said it would begin to charge for password sharing in the US, its largest market, in the next couple months. Analysts see this as a large potential source of new customers.
“Widespread account sharing undermines our ability to invest in and improve Netflix for our paying members, as well as build our business,” the company said in a statement to investors. “We’re pleased with the results of our Q1 launches in Canada, New Zealand, Spain and Portugal, strengthening our confidence that we have the right approach.”
The advertising tier debuted in November but has yet to contribute a material number of subscribers. The company had said that both advertising and password sharing will offer modest contributions in the first quarter of the year but would pick up in the current period.
Cracking down on password sharing will also cause some customers to stop using the service in the short term. Netflix’s challenge is to get them to pay for their own account, which would accelerate growth in markets like the US and Latin America.
Foreign territories accounted for almost all of Netflix’s growth in the quarter. The service added just 100,000 customers in the US and Canada after losing almost 1 million customers last year. The Asia-Pacific region continues to be Netflix’s bigger source of new customers. The service added 1.46 million customers there in the quarter, thanks in part to lowering prices in India. It lost subscribers in Latin America, a development that could be the result of the crackdown on password sharing.
Netflix is still the most popular TV network in the US by a good margin. It accounts for more than 7% of all TV viewing in the US each month, according to Nielsen, more than double any paid service. It also tops linear networks, according to CBS. Netflix released several new hits in the quarter, including new seasons ofGinny & GeorgiaandOuter Banks, the new showThe Night Agentand the filmYou People.
The company has urged investors to stop fixating on its subscriber additions and instead look at traditional financial metrics like sales and profit. But Wall Street has long treated Netflix like a growth stock, giving it a higher valuation than its peers in media because of its long-term potential.
That potential is largely predicated on the number of people who use Netflix.
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FAQs
Netflix's shares tumble as much as 12% as it struggles to attract new subscribers and stokes concerns that its big growth days are over. Actress Ali Wong, who plays a starring role in Netflix's new series "Beef".
Why the new paid subscriber growth has slowed down for Netflix? ›
But Netflix also warned Thursday that subscriber growth in the third quarter will be less than last year because of the challenging comparisons created by its password-sharing crackdown. The company also plans to stop reporting subscriber numbers beginning next year.
Why did Netflix stock go up so much? ›
Netflix (NFLX) stock scored a price-target hike Tuesday ahead of the company's second-quarter earnings report. Signs point to the internet television network beating Wall Street's Q2 estimates, an analyst said.
How much has Netflix subscribers grow? ›
Netflix had around 269.6 million paid subscribers worldwide as of the first quarter of 2024. This marked an increase of over nine million subscribers compared with the previous quarter.
Is Netflix falling on weak forecast plan to end subscriber count? ›
Netflix shares slid in April, when the company said it would stop giving quarterly counts of its subscribers in 2025. Some investors took that as a sign subscriber growth was ending. It didn't end in June. The quarter's subscriber count grew by 16%, or 8 million, to reach 277.7 million global memberships.
Why did Netflix's shares drop? ›
Netflix share price fell as much as 6.8 per cent on Friday on NASDAQ following a surprising announcement that it would cease disclosing subscriber additions and average revenue per member starting in 2025.
Why is Netflix declining? ›
Netflix's viewership atrophy may be due to implementing paid sharing, leading casual viewers to drop off and account holders to downgrade their plans or cancel their subscriptions altogether. This decline will come despite offering a lower-priced ad-supported option.
Who holds the most Netflix stock? ›
Vanguard owns the most shares of Netflix (NFLX). What is the significance of the ownership structure for a publicly traded company?
Is Netflix a good company to buy stock in? ›
With its 2-star rating, we believe Netflix's stock is overvalued compared with our long-term fair value estimate of $440, which implies a multiple of 24 times our 2024 earnings per share forecast.
Why buy Netflix shares? ›
Netflix is an industry-leading enterprise that is firing on all cylinders right now. It's been a volatile ride for Netflix (NFLX 2.06%) investors. But shares continue to be a big winner. They're up 25% just this year, and they are up 1,230% in the past decade, a monster gain that beats the Nasdaq Composite Index.
Key Facts. Netflix's $9.4 billion in first-quarter revenues and $5.28 profit per share were comfortably above consensus analyst estimates, with Netflix's top and bottom line marks both the best in its history.
Can I share my Netflix account with family in a different home? ›
A Netflix account is meant to be shared by people who live together in one household. People who are not in your household will need to sign up for their own account to watch Netflix. You can manage who uses your account by setting a Netflix Household.
Which country has the most Netflix subscribers? ›
Despite the United States being Netflix's leading market in terms of subscriber numbers, Australia and the United Kingdom had higher penetration rates.
Why is Netflix not reporting subscribers? ›
Netflix stopped providing subscriber guidance last year because management believed it was no longer as relevant to understanding the business as overall revenue growth. That move foreshadowed Thursday's decision to stop reporting the metric entirely starting in 2025.
Will Netflix stop providing subscriber numbers in 2025? ›
Netflix will stop reporting quarterly subscriber numbers starting with its first- quarter 2025 earnings, as the company says it's more focused on other metrics. Additionally, the streaming giant said Thursday that it would stop reporting average revenue per member, which it refers to as ARM.
What is Netflix's monthly revenue? ›
Netflix's global average monthly revenue per paying user (ARPU) is $16.64. Since 2017, there has been a sharp growth of 76.45%.
Is Netflix stopping reporting subscriber growth starting in 2025? ›
Netflix's stock crashed Thursday after the streaming giant said it would no longer report subscriber growth numbers to Wall Street, and instead focus on delivering key financial metrics, like operating margin and profitability.
Are Netflix users increasing or decreasing over time? ›
The second quarter of 2021 saw about 74 million streaming subscribers in the U.S., but the third quarter of 2022 reported a decline to around 70.7 million. The fourth quarter of 2023 marked a rebound, with approximately 76 million streaming subscribers reported.
What happened to Netflix subscribers? ›
Netflix Subscriber Numbers Fueled a Decade of Frenzied Streaming Bets. That Chapter Is Over. After juicing its subscriber base to 270 million with a password-sharing crackdown, execs want Wall Street to stop focusing on subs and to look at other metrics, like its revenue, operating income and engagement.
