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Topline

Shares of Netflix cratered 25% in after-hours trading on Tuesday after the streaming giant reported lackluster quarterly earnings that showed its first subscriber loss in more than a decade—with the company warning that it expects to lose even more in the months ahead.

Key Facts

Netflix’s stock plunged roughly 25% immediately following the company’s first-quarter earnings report, with revenue and subscriber growth both coming in below expectations.

The streaming giant reported quarterly revenue of $7.78 billion, up 10% from last year (compared to the $7.93 billion expected), but what really spooked investors was that Netflix lost 200,000 subscribers globally in the first quarter—far below the 2.7 million additions expected.

Worse yet, the company expects to lose another 2 million subscribers this current quarter, as it blamed password sharing and increased competition from rival streaming services for slowing revenue growth.

Netflix also said that suspending its service in Russia resulted in a loss of 700,000 subscribers, but even without that unforeseen circumstance, the company would still have only added 500,000 net additions last quarter.

After the recent subscriber loss, Netflix now has some 221.6 million paying customers globally, which is down from 221.8 million in the fourth quarter of 2021.

Crucial Quote

“Our revenue growth has slowed considerably,” the company wrote in a letter to shareholders Tuesday. “Households sharing accounts—combined with competition, is creating revenue-growth headwinds.”

Key Background

Shares of Netflix have struggled this year, falling over 40% amid the wider market selloff so far this year. Like other growth stocks, Netflix shares been especially hard-hit by surging inflation and rising rates, but a significant portion of the company’s recent struggles revolve around slowing subscriber growth amid increased competition. Rival platforms have been spending more money in a bid to gain market share as the streaming wars heat up. Facing threats from the likes of Disney+ and HBO Max, Netflix already spends the most on content, with a budget expected to reach more than $20 billion in 2022.

Further Reading

Robinhood Shares Jump 5% After Deal To Buy UK Crypto App Ziglu (Forbes)

IMF Sounds Alarm On ‘Significant Slowdown’ As Ukraine War And Inflation Slam Global Economies (Forbes)

Stocks Fall, Rates Climb Ahead Of Big Earnings Week That Includes Netflix And Tesla (Forbes)

Recession Calls Grow As Inflation Threatens Corporate Earnings And Rising Costs Hit Consumers (Forbes)

Source: Forbes

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