Netflix stock falls on disappointing revenue forecasts, move to scrap membership metrics

Netflix (NFLX) stock fell as much as 8% on Friday after the company delivered second-quarter revenue forecasts that beat estimates and announced it would stop reporting quarterly subscriber metrics closely watched by Wall Street.

On Thursday, Netflix cited second-quarter revenue of $9.49 billion, which was a miss compared to the consensus estimate of $9.51 billion.

The company said it will stop reporting quarterly membership numbers starting next year, along with average revenue per member, or ARM.

“Because we have evolved our pricing and plans from one tier to multiple tiers with different price points depending on the country, each additional paid membership has a completely different business impact,” the company said.

Netflix reported first-quarter earnings that beat all areas on Thursday, adding more than 9 million more subscribers in the quarter.

Subscriber additions of 9.3 million exceeded expectations of 4.8 million and followed net additions of 13 million added by the operator in the fourth quarter. The company added 1.7 million paid users in the first quarter of 2023.

Revenue surpassed Bloomberg's consensus estimate of $9.27 billion to reach $9.37 billion in the quarter, up 14.8% from the same period last year as the streamer relied on revenue initiatives like its crackdown on password sharing and its ad-supported tier, in addition. to recent price hikes on some subscription plans.

Netflix stock has been on a tear in recent months, with shares currently trading near the high end of its 52-week range. Wall Street analysts have warned that high expectations heading into print could serve as an inherent risk to the stock price.

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Earnings per share (EPS) beat estimates this quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the EPS figure of $2.88 it reported in the same period last year. . Netflix guided for Q2 EPS of $4.68, ahead of consensus calls of $4.54.

Profitability metrics were also strong, with operating margins reaching 28.1% in the first quarter compared to 21% in the same period last year.

The company had previously guided for full-year 2024 operating margins of 24% after the metric rose to 21% from 18% in 2023. Netflix expects margins to decline slightly in the second quarter to 26.6%.

Free cash flow reached $2.14 billion in the quarter, above consensus expectations of $1.9 billion.

Meanwhile, ARM rose 1% year-over-year – consistent with Q4 results. Wall Street analysts expect ARM to rebound later this year as the ad class effect and the effects of higher prices take hold.

On the advertising front, ad tier memberships increased 65% quarter-over-quarter after rising nearly 70% sequentially in Q3 2023 and Q4 2023. The advertising plan now represents more than 40% of all Netflix subscriptions in markets where It is presented therein.

FILE IMAGE: Netflix reported first-quarter earnings after the bell on Thursday.  Reuters/Dado Rovik/archive photo

Netflix reported first-quarter earnings after the bell on Thursday. Reuters/Dado Rovik/archive photo (Reuters/Reuters)

Alexandra Canal He is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, And email it to [email protected].

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