Netflix (NFLX) reported first-quarter earnings on Thursday that topped every mark, with more than 9 million additional subscribers added during the quarter. However, disappointing revenue guidance for the second quarter and full year, coupled with a new announcement on its reporting policies, sent the stock down more than 6% in pre-market trading Friday.
Subscriber additions of 9.3 million exceeded expectations of 4.8 million and followed the 13 million net adds added by the streamer in the fourth quarter. The company added 1.7 million paying users in the first quarter of 2023.
Notably, the company said it would stop publishing quarterly member counts starting next year, as well as average revenue per member, or ARM.
“While we have evolved our pricing and plans from a single tier to multiple tiers with different price points in different countries, each additional paid subscription has a very different business impact,” the company said.
Revenue topped Bloomberg consensus estimates of $9.27 billion to reach $9.37 billion in the quarter, an increase of 14.8% from the same period last year, the streamer leveraging revenue initiatives such as cracking down on password sharing and ad-supported tier. to recent price increases on certain subscription plans.
Netflix reported second-quarter revenue of $9.49 billion, missing consensus estimates of $9.51 billion.
Netflix stock has seen a sharp decline in recent months, with shares currently trading near the top of its 52-week range. Wall Street analysts had warned that high expectations heading into the release could pose an inherent risk to the stock price.
Earnings per share (EPS) beat estimates in the quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the figure of 2.88 $ of EPS announced a year ago. Netflix achieved second-quarter EPS of $4.68, ahead of the consensus forecast of $4.54.
Profitability metrics were also strong, with operating margins of 28.1% for the first quarter, compared to 21% for the same period last year.
The company previously forecast an operating margin of 24% for the full year 2024, after the metric rose to 21%, from 18% in 2023. Netflix expects margins to decline slightly in the second quarter, at 26.6%.
Free cash flow was $2.14 billion in the quarter, above consensus forecasts of $1.9 billion.
Meanwhile, ARM grew 1% year-over-year, matching fourth-quarter results. Wall Street analysts expect ARM to recover later this year as the impact on advertising levels and the effects of rising prices are felt.
On the advertising front, ad tier memberships increased 65% quarter over quarter after increasing nearly 70% sequentially in Q3 2023 and Q4 2023. The advertising plan now represents more than 40 % of all Netflix subscriptions in the markets in which it is offered.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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