Netflix stock sinks despite strong subscriber growth in Q1

Netflix Inc (NASDAQ: NFLX) is trading down in extended hours on Thursday even though it reported market-beating financial results for its first quarter.

Netflix reports a 16% growth in subscribers

The price action is interesting considering the mass media behemoth topped Street estimates for net new subscribers as well.

$NFLX ended its Q1 with 269.6 million subscribers in total – well above $264.21 million that experts had forecast. Its letter to shareholders reads:

We’ve built hard to replicate combination of strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix. Improvement in these key areas is the best way to continue to grow our business.

Wall Street currently has a consensus “overweight” rating on Netflix stock that’s still up more than 25% versus the start of 2024.

$NFLX guidance for full fiscal 2024

Note that Netflix Inc also issued a good enough guidance for the future on Thursday.

The streaming giant now forecasts up to a 15% annualised increase in revenue this year on operating margin at 25%, as per its earnings report. According to $NFLX:

To sustain healthy growth long term, we must continue to tap into additional revenue and profit pools — in particular scaling ads to become a more meaningful contributor to our business in ‘25 and beyond.

For its current quarter, the Nasdaq-listed firm forecasts a further growth in revenue to $9.49 billion on $4.68 of per-share earnings. Analysts, in comparison, were at $4.54 a share. Note that Netflix stock do not currently pay a dividend.

Netflix Q1 earnings snapshot

• Earned $2.33 billion versus the year-ago $1.30 billion
• Per-share earnings also improved from $2.88 to $5.28
• Revenue climbed 14.7% year-over-year to $9.37 billion
• Consensus was $4.52 a share on $9.28 billion in revenue

Netflix said its operating margin stood at a whopping 28.1% in the first quarter versus 21% a year ago. What’s weighing on shares of the $265 billion company based out of Los Gatos, California this evening, however, is perhaps the following statement:

We expect paid net additions to be lower in Q2’24 vs. Q1’24 due to typical seasonality … starting next year with our Q1’25 earnings, we will stop reporting quarterly membership numbers and ARM.

You can read $NFLX’s full letter to shareholders on this link.