Netflix (NFLX) stock rose on Friday after the company released a weaker-than-expected second-quarter revenue forecast and announced it would stop reporting the quarterly subscriber metrics closely watched by Wall Street. It fell by up to 9.6%.
On Thursday, Netflix projected second-quarter revenue of $9.49 billion, below the consensus estimate of $9.51 billion.
The company has announced that it will stop reporting quarterly 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. .
Netflix on Thursday reported strong first-quarter profits across the board, adding more than 9 million additional subscribers in the quarter.
Subscriber addition of 9.3 million exceeded expectations of 4.8 million and followed streamer net additions of 13 million in the fourth quarter. The company added 1.7 million paid users in the first quarter of 2023.
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'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) for the quarter beat expectations, with the company reporting EPS of $5.28, well above the consensus estimate of $4.52 and nearly double the year-ago quarter's EPS of $2.88. Netflix reported second-quarter EPS of $4.68, 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 later this year as the effects of advertising inventory and higher prices take hold.
On the advertising side, advertising tier membership increased 65% quarter-on-quarter after sequentially increasing nearly 70% in Q3 2023 and Q4 2023. Advertising plans currently account for over 40% of all Netflix sign-ups in the markets they serve.
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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