In an unexpected move, Netflix declared on Thursday that it would discontinue reporting subscriber numbers on a quarterly basis, a decision interpreted as a signal that the streaming giant may be reaching a plateau in its years-long battle for customers in the streaming landscape.
Following the announcement, shares of the streaming video pioneer experienced a decline. Despite reporting a substantial influx of new customers in the first quarter, Netflix fell short of analyst revenue forecasts. The stock saw an after-hours trading value of $585.41, reflecting a 4.2% decrease from its closing price.
Netflix attributed its success in attracting 9.3 million new customers to its ad-supported streaming plans, surpassing analyst projections by nearly double. This surge brought its global subscriber base to 269.6 million by the end of March.
Company executives emphasised a shift in focus towards revenue and operating margins as key indicators of progress, rather than customer acquisitions. Co-Chief Executive Greg Peters explained, "This change is really motivated by wanting to focus on what we see are the key metrics that we think matter most to the business."
However, concerns linger regarding the driving force behind new sign-ups once the company has exhausted its efforts to mitigate password sharing.
This move by Netflix echoes similar decisions made by other tech giants like Meta's Facebook and the former Twitter, who ceased reporting monthly active users as growth rates slowed.
Despite the challenges, Netflix remains a dominant force in the streaming arena, with its shares surging by 89% in the past year, outperforming competitors like Walt Disney, which continues to incur losses in its streaming ventures.
In a letter to shareholders, Netflix outlined plans for future growth, focusing on enhancing the quality and diversity of its content offerings and expanding its advertising business. The company, which once avoided commercials, is gearing up for its second annual advertiser presentation in New York.
Co-CEO Ted Sarandos expressed enthusiasm about the upcoming content slate, promising new seasons of popular shows like "Bridgerton" and "Sweet Tooth," along with unscripted events such as a roast of NFL legend Tom Brady.
Netflix's move towards ad-supported plans, introduced in November 2022, has proven successful, accounting for 40% of all sign-ups in markets where the option is available.
Financially, Netflix exceeded analyst expectations for earnings per share in the first quarter, reporting $5.28 against predictions of $4.52. Revenue climbed by 14.8% to nearly $9.4 billion, with operating income reaching $2.6 billion, a 54% increase year-over-year.
Looking ahead, the company projected a revenue of $9.49 billion for the current quarter, slightly below analyst estimates.
To cater to its vast global audience, Netflix is diversifying its content, including a $5 billion deal to stream WWE's "Raw" starting in January 2025.
Sarandos addressed recent speculation about Netflix's film strategy under new leadership, clarifying, "Just to be clear, there is no appetite to make fewer films. But there is an unlimited appetite to make better films, always."