Netflix’s first-quarter earnings did not hit analyst estimates for revenue and surpassed them for earnings per share. The streaming giant also gave a new timeline to curb password sharing.
Netflix said its first-quarter revenue increased 3.7% to $8.16 billion. Diluted earnings per share (EPS) was $2.88 for the quarter, down from the same three-month span last year.
Refinitiv analysts had anticipated $8.18 billion for revenue, and 2023’s Q1 narrowly missed that. On diluted earnings per share, Netflix beat estimates by about $0.02.
Netflix’s quarterly profits narrowed from the same time last year, with the streaming giant posting $1.3 billion in net income compared to $1.6 billion in the first-quarter of 2022.
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The company reported a continuation of the recent trend of subscriber growth. In the first quarter, it gained 1.75 million subscribers, a lift that brought the service’s total paid membership to 232.5 million. The Asia Pacific region led in additions with 1.46 million, and all but the Latin American region saw net increases.
Netflix, in an update to its plans, also revealed the U.S. and other countries can expect to see the broader launch of the company’s new password-sharing restrictions in the second quarter.
That wider move will come after Canada, New Zealand, Portugal and Spain already saw their Netflix users become subject to a new paid sharing policy in February.
Under the new policy, a subscriber with a standard or premium account can add an "extra member" at an extra cost. The four countries' success with the policy "pleased" Netflix, the company said.
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"With each launch, we learn more about how best to roll out these changes and what matters to members the most, in particular maintaining travel/watching on the go and the ability for people to better control access to their accounts as well as transfer profiles to separate accounts," Netflix said. "We could have launched broadly in late Q1, but we found enough improvement opportunities in these areas to shift a broad launch to Q2 to implement those changes."
Netflix said that while it did observe an initial "cancel reaction" in the four markets upon the news of the change, it later saw "increased acquisition and revenue" as account borrowers shifted to their own accounts or became "extra members" on an existing one. The wider launch will "shift some of the membership growth and revenue benefit from Q2 to Q3" but will "ensure a bigger revenue base" long term, according to the company.
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The streaming giant pointed to Canada as a "predictor" for how the U.S. market will react to paid sharing. There, the subscriber base became "larger than prior to the launch of paid sharing," according to Netflix.
Netflix also disclosed that a total of 116 countries saw the cost of subscriptions decline during the quarter, a share it said "represented less than 5%" of its 2022 revenue. The company said it "believe[s] that increasing adoption in these markets will help to maximize our revenue longer term."
For the second quarter, the streaming giant projected $8.24 billion in revenue and $1.28 billion in net income.
