By Lisa Richwine and Dawn Chmielewski
LOS ANGELES (Reuters) -Netflix blew past Wall Street expectations on new customers for the second straight quarter on Thursday but signaled the positive surprises could be over, forecasting revenue growth slightly below analyst targets.
Shares of the streaming video pioneer initially rose about 3% in extended trading after the results but then reversed course to fall 4% to $586.50.
The company said its ad-supported streaming plans helped bring in 9.3 million new customers, nearly double the consensus forecast of analysts polled by LSEG.
For the current quarter, Netflix projected revenue of $9.49 billion compared with analyst expectations of $9.537 billion.
Earnings per share for January through March came in at $5.28, compared with $2.88 a year earlier.
Netflix revenue rose 14.8% to nearly $9.4 billion during the period, when the service debuted titles such as sci-fi drama series “3 Body Problem” and crime thriller “Griselda.”
Operating income totaled $2.6 billion, a year-over-year increase of 54%.
Analysts had expected Netflix to add roughly 5 million subscribers around the world during the quarter, according to LSEG data, after record gains at the end of 2023. The additions brought Netflix’s total subscribers to 269.6 million at the end of March.
Executives have urged investors to focus on revenue and operating margins as key financial metrics rather than subscribers. Netflix said it will stop reporting subscriber additions each quarter starting with the first quarter of 2025, and instead will announce them only when major milestones are reached.
Analysts said the decision would likely rankle investors.
“While this is partially a sign of Netflix’s unrivaled market share, it also raises questions about the streamer’s ultimate ceiling in the current landscape,” said Brandon Katz, industry strategist for Parrot Analytics.
Netflix told shareholders in a letter: “We have built a hard to replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix.”
As competitors such as Walt Disney are losing money from their streaming efforts, Netflix keeps gaining customers and building profit. In the shareholder letter, the company said it would work to improve the variety and quality of its entertainment and scale its advertising business to grow further.
“We have built a hard to replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix,” the company said in a letter to shareholders.
Netflix began offering ad-supported plans, which cost less than half of the options without commercials, in November 2022. In 2023, it started a crackdown on sharing of passwords,
trying to convert people who use the accounts of friends or family into paying subscribers.
The company said the version of its service with ads now accounts for 40% of all sign-ups in markets where it offers the plan.
To satisfy its large global audience, Netflix has been broadening its programming. The streaming service is expanding its sports offering with a $5 billion, 10-year deal to stream WWE’s wrestling show, “Raw,” starting in January 2025.
The company recently restructured its film division under new leader Dan Lin and is aiming to produce fewer, higher- quality movies for streaming.
(Reporting by Lisa Richwine and Dawn Chmielewski in Los AngelesAdditional reporting by Harshita Mary Varghese and Aditya Soni in BengaluruEditing by Matthew Lewis)
