Netflix achieved commendable results in the first quarter, posting better-than-projected earnings and a substantial surge in subscriber growth. Still, shares dropped almost 4% to $587.09 in post-market trading due to a disappointing revenue forecast that fell short of analysts' predictions. The company managed a 16% year-on-year increase in subscribers, amounting to 9.33 million new paying customers added in the three months leading up to March.
Following a slowdown in 2022, the streaming giant has observed continuous growth in subscribers, even amidst a password sharing crackdown. The combination of an impressive content lineup, comprehensive reach, superior recommendations, and passionate fanbase, has boosted engagement levels on the platform, which the company attributes to their continued success.
Revenue for the first quarter rose by 14.8% to reach $9.37 billion, outperforming most analyst predictions. However, the forecasted revenue for the second quarter is roughly 16%, just short of the $9.5 billion predicted by Visible Alpha analysts. Moreover, Netflix predicts its annual revenue to achieve a 13%-15% growth. The company also increased its full-year operating margin guidance by 100 basis points to 25%, a result of exchange rate fluctuations.
While the number of subscribers has increased, the revenue heavily depends on the success of advertising on Netflix. This includes revenue generated from advertisers, as well as additional income from tiered subscription plans for advertisements-free streaming. Over the last quarter, membership for ad-supported services shot up by 65%, with 40% of all new sign-ups opting for the version of the service featuring ads, where available. The company also stated that it struck fresh alliances to offer improved measurement tools for advertisers.