Netflix reported strong first-quarter earnings that beat expectations, with total memberships reaching 269.6 million, surpassing Wall Street estimates of 264.2 million. The company announced that it will no longer provide quarterly membership numbers or average revenue per user, shifting its focus to revenue and operating margin as primary financial metrics. Netflix stated that membership growth was once a significant indicator of its potential when it had little revenue or profit, but as the company has evolved and diversified its revenue streams, membership numbers have lost their significance.
The company’s decision to stop reporting specific quarterly numbers comes as it transitions from prioritizing subscriber growth to focusing on profitability. Netflix has been using price hikes, a crackdown on password sharing, and the introduction of an ad-supported tier to boost revenue. The company is also exploring partnerships, such as its collaboration with TKO Group Holdings to bring WWE content to its platform. Netflix is looking to expand its offerings in live programming and potentially live sports, with co-CEO Ted Sarandos expressing excitement about the potential of such content to engage and attract members.
Investors are eager to see how Netflix’s efforts to increase revenue will impact its future growth and profitability. The company’s first-quarter results showed net income of $2.33 billion and earnings per share of $5.28, surpassing expectations. Revenue for the quarter was $9.37 billion, up from $8.16 billion in the previous year. While Netflix expects paid net additions to be lower in the second quarter due to seasonality, its revenue forecast of $9.49 billion fell slightly short of Wall Street estimates.
Despite the strong earnings, Netflix’s stock fell around 4% in extended trading following the announcement of the change in reporting metrics. The company’s focus on revenue and operating margin, as well as its emphasis on engagement as a proxy for customer satisfaction, reflects its evolving priorities as a mature and profitable streaming service provider. Netflix’s stock has been performing well, up 27% year to date and around 85% over the last 12 months, indicating investor confidence in the company’s ability to navigate its transformation and continue to grow its business through new revenue streams and partnerships.
