Despite posting better-than-expected financial results and experiencing robust subscriber growth in the latest quarter, Netflix shares faced downward pressure late Thursday, as investors reacted to the streaming-video provider’s decision to discontinue providing certain key performance metrics favored by Wall Street.
In the first quarter, Netflix exceeded expectations by adding 9.33 million net new subscribers, far surpassing the Wall Street consensus of 5.1 million. Revenue also outperformed, reaching $9.37 billion, a 15% increase year-over-year. Profits for the quarter were $5.28 per share, exceeding both company guidance and analyst estimates.
Notably, Netflix observed a significant increase in ad-based memberships, which rose by 65% sequentially and accounted for 40% of all signups in countries where ad-based subscription options are available.
Looking ahead, Netflix provided guidance for the second quarter, anticipating revenue of $9.49 billion, up 16% from the previous year. However, this fell slightly below the consensus estimate of $9.52 billion. Profit projections for the second quarter, at $4.68 per share, exceeded analyst expectations of $4.54.
Despite the positive financial outlook, Netflix’s decision to halt the disclosure of quarterly membership data and average revenue generated per member caught investors by surprise. The company cited the evolving nature of its subscription plans, which now offer multiple options at various price points, as the rationale behind this move. Instead, Netflix plans to focus on key operational metrics such as operating income, EPS, margins, and free cash flow, starting from the first quarter of 2025.
The decision to shift focus away from traditional metrics reflects Netflix’s evolving business model and management’s desire to streamline performance reporting. CO-CEO Greg Peters emphasized the importance of prioritizing metrics that align with the company’s strategic objectives and internal management practices.
Additionally, Netflix announced an expansion of its revolving credit facility to $3 billion and disclosed the repayment of $400 million in senior notes, along with $2 billion in stock repurchases during the quarter.
While the financial results were generally positive, the unexpected change in reporting practices led to a 3.3% decline in Netflix’s stock price during after-hours trading. As investors digest this shift in disclosure strategy, the company remains focused on sustaining its growth momentum and delivering value to shareholders in the long term.
