On Tuesday, Netflix’s (NFLX) stock declined by up to 10% after the company announced that it had fewer sign-ups for its service during the first quarter than what analysts had predicted. Additionally, the company’s earnings and revenue projections disappointed investors after it revealed its expectation of $8.24 billion in revenue and $2.84 in diluted EPS for the second quarter, which was below Wall Street’s forecasts.
Investors were eagerly anticipating updates regarding the company’s newly launched ad-supported tier and its controversial crackdown on password-sharing. Netflix’s crackdown will be broadly rolled out in the current quarter and will include the United States.
The company also announced that it is upgrading its ads experience, with more streams and improved video quality to attract a broader range of consumers. The ad-supported plan, named “Basic with Ads,” costs $6.99 a month in the United States and serves as a complement to Netflix’s existing ad-free tiers, namely, the Standard plan ($15.49 a month) and the Basic plan ($9.99 a month.)
Netflix’s earnings release also stated, “In short, we’re off to a good start in 2023. As always, our focus remains on pleasing our members and attracting great creators so that we can continue to build a wildly successful business.”
Here is how Netflix’s first-quarter results compare to Wall Street’s estimates, as compiled by Bloomberg:
- Revenue: $8.24 billion versus the expected $8.18 billion
- Earnings per share (EPS): $2.88 versus the expected $2.86
- Subscribers: 1.75 million versus the expected 2.3 million net additions