Netflix (NFLX) reported first-quarter profits on Thursday that were better across the board, with the company adding more than 9 million additional subscribers in the quarter. However, the company's stock price fell more than 3% in after-hours trading after the company's sales outlook for the second quarter was disappointing.
Subscriber growth of 9.3 million was above expectations of 4.8 million and follows the streamer's net addition of 13 million in the fourth quarter. The company added 1.7 million paid users in the first quarter of 2023.
Notably, the company has announced that it will discontinue quarterly reporting of membership numbers and average revenue per member (ARM) starting next year.
“As we have evolved our pricing and plans from a single tier to multiple tiers with different price points depending on the country, each increase in paid membership has a significantly different impact on the business,” the company said. .
Revenue for the quarter rose 14.8% year-over-year to $9.37 billion, beating the Bloomberg consensus estimate of $9.27 billion. This is driven by streamers' focus on revenue measures such as password sharing and crackdowns on ad-supported tiers, as well as recent price increases for certain subscription plans.
Netflix expected second-quarter revenue of $9.49 billion, below the consensus estimate of $9.51 billion.
Netflix's stock price has fallen sharply in recent months, with the stock currently trading near the top of its 52-week range. Wall Street analysts had warned that high expectations heading into the paper could pose an inherent risk to the stock.
Earnings per share (EPS) exceeded expectations for the quarter, with the company reporting EPS of $5.28. This is well above the consensus estimate of $4.52 and nearly double the $2.88 EPS reported in the year-ago period. Netflix reported his EPS of $4.68 for the second quarter, beating the consensus estimate of $4.54.
Profitability metrics were also strong, with an operating margin of 28.1% in the first quarter, compared to 21% in the same period last year.
The company previously said it expected full-year operating profit margin of 24% in 2024, after increasing from 18% to 21% in 2023. Netflix expects its profit margin to decline slightly to 26.6% in the second quarter.
Free cash flow for the quarter was $2.14 billion, beating the consensus call of $1.9 billion.
Meanwhile, ARM increased 1% year-over-year, in line with Q4 results. Wall Street analysts expect ARM's stock price to recover in the second half of this year as both the impact on inventory and the effects of price increases take hold.
On the advertising side, advertising tier membership increased 65% sequentially, following sequential increases of nearly 70% in Q3 2023 and Q4 2023. Currently, this advertising plan accounts for over 40% of all Netflix sign-ups in markets where Netflix is offered.
alexandra canal I'm a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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