April 18 (Reuters) – Netflix Inc (NFLX.O) beat Wall Street’s first-quarter earnings estimates but offered a softer-than-expected forecast on Tuesday, demonstrating the challenges the mature streaming service is facing in its continued growth.
The company said it postponed the broader launch of a plan to crack down on unauthorized password sharing until the second quarter to make improvements, delaying some financial benefits, but said it was happy with the results. results so far.
As the streaming video pioneer faces signs of market saturation, it’s looking for new ways to make money, like password crackdowns and a new ad-supported service.
First-quarter revenue and earnings are roughly in line with average Refinitiv analyst estimates. Earnings per share reached $2.88 on revenue of $8.162 billion.
“We’re growing and profitable,” co-chief executive Ted Sarandos said in the company’s post-earnings video interview. “We have a clear path to accelerate revenue and profit growth, and we are executing it.”
Shares of Netflix fell 11% in after-hours trading after the report, but recovered to gain 1.4%.
Netflix serves as a barometer for the streaming industry, in which growth has slowed as competition has intensified.
From January to March, Netflix added 1.75 million streaming subscribers, missing analysts’ estimates of 2.06 million additions.
PP Foresight analyst Paolo Pescatore called first-quarter results mixed.
“Netflix is a mature company that is increasing its reliance on subscriber growth. However, this metric still moves the needle for key stakeholders,” he said.
The company began rolling out its password-sharing solution – offering a “paid sharing” option – to 12 countries in February, but is delaying expansion.
“We believe this will translate to better outcomes for our members and our business,” the society said. Netflix also said it was “on track to meet our financial goals for the year 2023.”
The crackdown on password sharing will begin in the United States in the current quarter, Netflix said.
From April to June, the company forecast revenue of $8.242 billion and diluted EPS of $2.86. Wall Street had forecast $8.476 billion in revenue and $3.05 in diluted EPS.
Netflix is also getting into live streaming. The company angered fans of the dating show “Love is Blind” on Sunday when a reunion special that was to be broadcast live was unavailable. The incident was caused by a “bug” that has been fixed, co-CEO Greg Peters said Tuesday.
A year ago, Netflix lost 200,000 subscribers – its first drop in subscribers in more than a decade, sending its stock tumbling and resetting Wall Street expectations for the industry.
Netflix added nearly 9 million subscribers in 2022, half of the 18 million gained the previous year, with much of that growth coming from Asia, notes research firm MoffettNathanson. Gains in Asia and Latin America impacted average revenue per user, prompting Netflix to change its business model, the company said.
The company launched a cheaper version of its service with ads in 12 countries in the fourth quarter.
UBS media analyst John Hodulik wrote that the crackdown on password sharing may well fuel Netflix’s nascent advertising business as it pushes those “sharers” to the cheaper version of the service.
Sarandos said Netflix hopes Hollywood studios can reach a “fair and equitable” deal with the writers to avoid a strike, but he also noted that the company has access to programs from around the world that it can offer if the US-based production is discontinued.
Reporting by Dawn Chmielewski and Lisa Richwine in Los Angeles Editing by Peter Henderson and Matthew Lewis
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