Netflix (NFLX) reported mixed first-quarter results on Tuesday, missing Wall Street subscriber estimates while beating analyst expectations on earnings per share.
The stock, which initially fell as much as 12% after the release, saw shares pare losses as investors digested the report — the first since co-CEO and co-founder Reed Hastings stepped down from his leading role at the company.
Here are Netflix’s first-quarter results compared to Wall Street’s consensus estimates, as compiled by Bloomberg:
Revenue: $8.16 billion versus $8.18 billion expected
Earnings per share (EPS): $2.88 versus $2.86 expected
Subscribers: 1.75 million versus 2.3 million net additions expected
Earnings and revenue projections disappointed after Netflix revealed it anticipates earning $2.84 per share on $8.24 billion in the second quarter, below Wall Street forecasts for earnings of $3.05 per share on $8.5 billion in revenue.
Profitability, margins and free cash flow surpassed expectations as the streamer cut its content spend by $1 billion in the quarter compared to the same period last year.
The company, which raised its full-year free cash flow projection to $3.5 billion from $3 billion, said it will stay around its $17 billion annual content spend through 2024 but added there’s more room to grow.
“As we reaccelerate revenue, we see a lot of opportunity to grow into that viewing, engagement, and business opportunity ahead,” Netflix CFO Spencer Neumann said on the earnings call.
The results come as investors eagerly await updates regarding the company’s recently-launched ad-supported tier, in addition to its controversial crackdown on password sharing.
Netflix, which broadened its crackdown to include countries like Canada, New Zealand, Portugal, and Spain, in addition to the test countries of Chile, Costa Rica, and Peru, revealed it’s planning “a broad rollout” of the policy this quarter that will include the US.
“While we could have launched [paid account sharing] broadly in Q1, we found opportunities to improve the experience for members. We learn more with each rollout and we’ve incorporated the latest learnings, which we think will lead to even better results,” the company wrote in the release, adding it’s “pleased with the results” so far despite near-term churn seen in Latin American markets.
Netflix also revealed more insights into its ad-supported tier, telling shareholders in the release: “While it’s still very early days, we continue to be pleased with our progress across all key dimensions: member experience, value to advertisers and incremental contribution to our business. Engagement on our ads tier is above our initial expectations and, as expected, we’ve seen very little switching from our standard and premium plans
The ad plan, dubbed “Basic with Ads,” comes at a cost of $6.99 a month in the US and serves as a complement to Netflix’s existing ad-free tiers — the Standard plan ($15.49 a month) and the Basic plan ($9.99 a month.)
The company, which said the ad tier now has about 95% of the same content as ad-free plans due to new licensing deals, added, “Given current healthy performance and trajectory of our per-member advertising economics, particularly in the U.S., we’re upgrading our ads experience with more streams and improved video quality to attract a broader range of consumers.”
Prior to the earnings results, the company revealed it would be is shuttering its 25-year DVD rental division, explaining its been hard to provide the best service as the business “continues to shrink.”
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