Netflix tanks 25% on Q1 results: it’s a warning for streaming services

By:
on Apr 19, 2022
  • Netflix Inc lost subscribers in its fiscal Q1 for the first time in a decade.
  • Management expects the loss of subscribers to get even worse in Q2.
  • Netflix shares tanked more than 25% in extended trading on Tuesday.

Netflix Inc (NASDAQ: NFLX) shares tanked 25% in extended trading on Tuesday after the streaming giant said it lost subscribers in its fiscal Q1 for the first time in a decade. The loss of subscribers is expected to get even worse in the current quarter, as per the management.

Key takeaways from Netflix Q1 results

  • Lost 200,000 paid subscribers versus 2.5 million net additions expected.
  • Earned $1.60 billion in the fiscal first quarter or $3.53 per share.
  • Netflix had earned $3.75 a share in the same quarter last year.
  • Revenue jumped 10% to $7.87 billion, as per the earnings press release.
  • FactSet consensus was for $2.90 of EPS on $7.93 billion in sales.

The hit to subscriber growth was related to a price increase in North America that shrunk Netflix subscribers in the region by 640,000 in Q1. Other reasons cited include increased competition, password sharing, the Ukraine war, inflation, sluggish economic growth, and some lingering disruption from the pandemic.

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Netflix forecasts a loss of 2 million paid subscribers

In the current fiscal quarter, Netflix now expects a loss of 2 million paid subscribers versus the Street at 2.55 million net additions.

It forecasts $8.05 billion in revenue, below the FactSet consensus of $8.22 billion. Profit estimates matched expectations, though. On CNBC’s “Closing Bell”, EMJ Capital’s Eric Jackson said:

It’s a warning for streaming services that this is a really tough long road that they have signed up for. I think smaller players, think Paramount, will probably have to team up with Discovery, HBO etc. to have a hope of making it through this.

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