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After market drop of nearly 5%! Netflix's Q1 performance exceeded expectations and will no longer release new user data starting next year

因醉鞭名马幌
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US streaming giant Netflix added a much higher than expected 9.33 million subscribers in the first quarter of 2024, but will no longer disclose subscription data starting next year.
On April 18th local time, Netflix released its first quarter financial report for the year ended March 31, 2024 after the US stock market closed. During the reporting period, the company achieved revenue of $9.37 billion, a year-on-year increase of 14.8%, higher than the market's expected $9.26 billion; Net profit of $2.332 billion, adjusted earnings per share of $5.28. The company expects to achieve a revenue of 9.491 billion US dollars in the second quarter of 2024, a year-on-year increase of 15.9%, slightly lower than the market expectation of 9.5 billion US dollars; The earnings per share are $4.68.
As of the close of the 18th, the total market value of Netflix (Nasdaq: NFLX) was $264.2 billion. According to Wind data, Netflix's stock price has risen by 25.4% since the beginning of this year.
Netflix's Q1 2024 performance and Q2 forecast. Source: Netflix Financial Report
In terms of the most watched subscription users, Netflix reported an increase of 13.1 million paying users in the fourth quarter of last year, and continued to rise in the first quarter of this year, adding 9.33 million paying users. The total number of paid members of Netflix reached 269.6 million in the first quarter, a year-on-year increase of 16%, exceeding market expectations of 264.52 million.
However, regarding the guidance for the next quarter, Netflix reminds that "seasonal factors will lead to a lower user growth in the second quarter than in the first quarter," suggesting that the positive momentum of user growth may slow down.
Netflix also threw a "heavyweight bomb" in this financial report, stating that it will stop reporting on paid member growth and average user revenue (ARM) from the first quarter of 2025, and only report specific user "milestones". Affected by this, the stock price of Netflix has fallen by nearly 5%.
For a long time, the growth rate of paid members and ARM have been the main ways Wall Street evaluates Netflix's performance. However, Netflix stated that the company considers revenue and operating profit margin as the main financial metrics, while also using customer engagement (i.e. time spent by users) as the main indicator of customer satisfaction.
Netflix wrote in its financial report, "During our startup period, the company's revenue and profits were not high, and membership growth was a strong indicator of our future potential. However, now we are generating very substantial profits and free cash flow (FCF). We are also developing new sources of revenue, such as advertising and additional membership privileges, so membership is only a part of our growth momentum. In addition, as we evolve pricing and subscription plans into multiple tiers and different prices in different countries, each new paid member will have a significant commercial impact."
The market has mixed opinions on this significant change in Netflix's information disclosure. Some investors are concerned that this change may indicate a slowdown in the growth rate of Netflix users. Although tech giants such as Apple and Amazon have never disclosed user related data for their streaming services, other streaming services such as Disney, Warner Bros. Exploration, and Paramount Global insist on disclosing data.
Paolo Pescatore, a technology and media analyst at consulting firm PP Foresight, said, "Netflix's move to stop disclosing quarterly user subscriptions may not proceed smoothly, especially considering the company's subscription growth last year."
In 2023, Netflix launched a membership program with advertisements for $6.99 per month. Netflix stated in its last quarter financial report that although it does not believe that advertising revenue will become the company's main source of revenue in 2024, Netflix is striving to expand the scale of this business. In this quarter, Netflix has made progress in expanding its membership base and enhancing services for advertisers, with advertising membership increasing by 65% year-on-year, and over 40% of new registrations in the entire advertising market coming from advertising membership programs.
In terms of content, during the post earnings conference call, Netflix executives stated that the company's main goals include improving the diversity and quality of entertainment products such as television programs, movies, and games provided. Ted Sarandos, co-CEO of Netflix, said, "Although we have produced and are currently producing many excellent movies, we want to make them better." However, Sarando added that he believes there is no need to increase spending on content.
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