Netflix Inc beat Wall Street earnings estimates for the first quarter but offered a lighter-than-expected forecast on Tuesday, demonstrating the challenges the mature streaming service faces in its pursuit of growth.
The company said 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, but said it was pleased with results so far.
As the streaming video pioneer faces signs of market saturation, it is looking to new ways to make money, such as the password crackdown and a new ad-supported service.
Revenue and earnings for the first quarter came in roughly in line with the average analyst estimates from Refinitiv. Earnings per share hit $2.88 with revenue of $8.162 billion.
“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%.
Netflix serves as a bellwether for the streaming industry, in which growth has slowed as competition has intensified.
From January through March, Netflix added 1.75 million streaming subscribers, missing analyst estimates of 2.06 million additions.
Analyst Paolo Pescatore of PP Foresight described the first- quarter results as mixed.
“Netflix is a mature business reinforcing less reliance on subscriber growth. However, this metric still moves the needle for key stakeholders,” he said.Smartphone with Netflix logo is seen in front of a stock graph in this illustration taken April 19, 2022. REUTERS/Dado Ruvic/IllustrationReuters Graphics
The company began rolling out its solution for password-sharing – offering a “paid sharing” option – in 12 countries in February but is delaying expansion.
“We believe it will result in a better outcome for our members and our business,” the company said. Netflix also said it was “on track to meet our full year 2023 financial objectives.”
The clampdown on password sharing will begin in the United States during the current quarter, Netflix said.