Netflix on Tuesday added fewer latest customers than Wall Street expected in the first quarter and forecast below analysts’ estimates for the next three months because it delayed the broader start of password sharing.
Netflix shares fell as much as 7% in after-hours trading before the pairing lost. The stock fell 1.8% to $327.74. Shares of streaming rivals including Walt Disney and Roku fell about 1%.
Between January and March, Netflix added 1.75 million streaming subscribers, beating analysts’ estimates of two.06 million latest users.
The corporate began rolling out its password-sharing solution in 12 countries in February. Netflix said it has pushed a wider release to the second quarter, meaning it won’t profit until the end of the 12 months.
“We imagine this can result in higher outcomes for our members and our company,” the company said. It also said it was “on course to fulfill our financial targets for the full 12 months 2023.”
For the April-June period, the company forecasts $8.242 billion in revenue and $2.86 in diluted earnings per share. Wall Street projected $8.476 billion in revenue and $3.05 in diluted EPS.
Netflix is at the forefront of the streaming industry, where growth has slowed as competition has increased.
A 12 months ago, Netflix lost 200,000 subscribers – the first drop in subscribers in greater than a decade, sending its stock down and resetting Wall Street’s expectations for the sector.
Netflix added nearly 9 million subscribers in 2022, lower than half the 18 million it gained the previous 12 months, with much of that growth coming from Asia, research firm MoffettNathanson notes. Profits made in Asia and Latin America impacted average revenue per user, prompting Netflix to make changes to its business model, the company said.
In the fourth quarter, the company launched a lower-cost version of its ad-supported service in 12 countries.
In February, Netflix officially began rolling out its password-sharing solution in 12 countries.
In its quarterly letter to shareholders, Netflix said it was “pleased” to start out paid-for streaming and plans to roll out widely this quarter, including in the United States.
The corporate said 100 million households share passwords, including about 30 million households in the US and Canada.
In keeping with Moffett Nathanson’s estimates, if Netflix could convert 100% of those users who shared passwords, it will generate a further $4.4 billion in revenue.
UBS media analyst John Hodulik wrote that a password-sharing attack could successfully fuel Netflix’s nascent promoting business because it directs those “shavers” to a less expensive version of the service.