Netflix Reports Profits Surge, But Forecast Disappoints

Netflix reported a surge in profits in the first quarter of the year as it cracked down on password sharing and promoted an ad-supported subscription tier.

But the company gave a disappointing revenue forecast for the second quarter and said it would stop reporting quarterly susbcriber metrics starting next year.

The firm’s shares plunged on Friday amid investor concerns that the move indicated slowing subscriber growth.

Netflix added 9.3 million subscribers for the first quarter, beating expectations of 4.8 million and following the 13 million net additions for the fourth quarter.

Revenue surge

That compared to an addition of only 1.7 million subscribers for the same period a year earlier.

Revenue hit $9.37 billion (£7.56bn) for the quarter, beating analysts’ expectations, up 14.8 percent year-on-year following a crackdown on password sharing that began last year.

The crackdown also helped boost subscriber figures in the fourth quarter.

Another revenue initiative, a new subscriber tier that costs less but shows adverts, saw a 65 percent increase in memberships from the previous quarter after rising 70 percent sequentially in both the third and fourth quarters of last year.

The advert plan now accounts for more than 40 percent of all Netflix sign-ups in the memberships in which it is offered, the firm said.

But industry watchers questioned whether the password-sharing crackdown would result in sustainable subscriber growth.

Growth concerns

Jamie Lumley of research firm Third Bridge wrote in a research note that Netflix’ decision to stop reporting subscriber metrics raises “questions about the growth prospects of Netflix’s subscriber base”.

Tech firms such as Facebook parent Meta and social media platform X, formerly Twitter, also stopped reporting subscriber figures as growth slowed.

Netflix said subscriber numbers have become “just one component of our growth” and asked investors to focus instead on profits and revenue.

“As we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the firm said.