Net-Mixed – Netflix’s Quarterly Earnings
It’s always fun when Netflix reports quarterly earnings as you know a big move is always going to follow. Investors generally come out with a sense of disappointment or excitement, and there were a lot of talking points coming into their first quarter earnings call yesterday. The company has recently made changes in leadership with Reed Hastings leaving his role as CEO, along with incorporating a new subscription plan that involves ads for a lower cost.
Overall, Netflix added 1.75 million subscribers in the first quarter, a large slowdown from the previous quarter where they saw more than 7.5 million new subscribers. Revenue rose by 3.7 percent to $8.17 billion, falling short of Netflix’s projection of 4 percent. Another major announcement that came with the earnings was that Netflix will discontinue their DVD segment, which was the original business before streaming was created, marking the end of an era.
The general theme surrounding Netflix’s results is that the positive effects are set for the long term in future quarters. When it comes to their crackdown on password sharing, it has moved slower than expected and is now estimated to materialize in the third quarter of 2023. They are now viewing different options to turn those who are relying on password sharing methods into revenue, whether it’s forcing them to create their own account or charging extra for accounts with multiple users. Netflix’s price cuts, which were made in response to other streaming services to attract more customers, have yet to significantly affect revenue numbers and should have a greater impact in future quarters. Overall, the ad-supported subscription seems to be working well, and there are high expectations for the second and third quarters.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.