Welcome to Extreme Investor Network, where we provide you with the latest insights and analysis on all things finance. Today, we dive into the recent earnings report from Netflix (NFLX) and how it has impacted the stock price.
Netflix reported first quarter earnings that exceeded expectations, with a remarkable 9 million-plus subscribers added in the quarter. This surge in subscriber additions outperformed expectations, following the 13 million net additions in the previous quarter. Additionally, the company added 1.7 million paying users in Q1 2023.
However, despite the impressive subscriber growth, the stock experienced a decline of over 6% in pre-market trading on Friday. This was due to disappointing second quarter and full-year revenue guidance from Netflix. The company also made an announcement that it will no longer report quarterly membership numbers starting next year, along with average revenue per member (ARM).
In terms of financials, Netflix’s revenue for the first quarter reached $9.37 billion, surpassing Bloomberg consensus estimates and marking a 14.8% increase compared to the same period last year. The company attributed this growth to revenue initiatives such as its crackdown on password-sharing, introduction of an ad-supported tier, and recent price hikes on certain subscription plans.
Looking ahead, Netflix provided guidance for second quarter revenue of $9.49 billion, slightly below consensus estimates. The company’s profitability metrics also showed strength, with operating margins at 28.1% for the first quarter, up from 21% in the same period last year. Netflix expects margins to dip slightly in Q2 to 26.6%.
Furthermore, Netflix reported earnings per share (EPS) of $5.28 for the first quarter, significantly surpassing consensus expectations and nearly doubling the EPS figure from the year-ago period. The company also guided to second quarter EPS of $4.68, above consensus calls.
On the ad front, ad-tier memberships saw a significant increase quarter over quarter, now accounting for over 40% of all Netflix sign-ups in markets where it’s offered. Analysts anticipate further growth in ARM as the effects of the ad-tier and price hikes take hold.
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