Netflix added 1.75 million net new subscribers in Q1, compared with gaining a whopping 7.66 million for the final quarter of 2022, the period during which its lower-cost, ad-supported tier launched, the streamer revealed in its first-quarter 2023 earnings results Tuesday.
Running from Jan. 1-March 31, Q1 marked the first full quarter with Netflix’s ad-filled option available to subscribers. The streamer ended the period with a total global subscriber count of 232.5 million.
Netflix halted its pattern of providing subscriber guidance for the next quarter with its Q4 earnings in January, citing a shift in focus away from subs growth and toward revenue. As such, no self-set goals were revealed by the streamer for Wall Street to compare these Q1 results to — but a general consensus saw investors banking on approximately 2.3 million net additions.
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While the 1.75 million growth in new customers is far from 2.3 million, it does still represent 4.9% year-over-year growth in subscribers for Netflix.
Paid memberships rose 100,000 in the U.S. and Canada, 640,000 throughout Europe, the Middle East and Africa and 1.5 million in the Asia-Pacific region. Subs fell by 450,000 in Latin America.
“In Q1, we had several big returning series and films – demonstrating our growing ability to develop stories across genres – including ‘Outer Banks’ S3, ‘You’ S4, ‘Ginny & Georgia’ S2, ‘Soy Georgina’ S2, ‘The Glory’s’ new installment and a big sequel to our hit film ‘Murder Mystery,”” Netflix said in a letter to shareholders accompanying the Q1 financials. “Building anticipation and buzz before and after titles premiere is a key goal for our marketing team as it helps drive acquisition and retention.”
Elsewhere in the note to investors, Netflix revealed that beginning in Q2, it will finally expand its password-sharing crackdown to the U.S. The company plans to start blocking devices (after a certain period of time) that attempt to access a Netflix account without properly paying. “In Q1, we launched paid sharing in four countries and are pleased with the results,” Netflix said. “We are planning on a broad rollout, including in the U.S., in Q2.”
Wall Street forecast earnings per share (EPS) of $2.86 on $8.2 billion in revenue, according to analyst consensus data provided by Refinitiv. Netflix actually reported diluted EPS of $2.88 (or $1.3 billion net income) on $8.2 billion in revenue, beating on earnings and meeting revenue expectations. Revenue was up 3.7% year over year.
Free cash flow stood at $2.1 billion. Operating income was $1.7 billion with a 21% operating margin.
Revenue from U.S. and Canada ops grew 8% vs. Q1 2022, while Europe, Middle East and Africa revenue was down 2%. Latin America revenue was up 7% and Asia-Pacific increased 2%.
“We’re on track to meet our full year 2023 financial objectives,” Netflix wrote. “For Q2’23, we forecast revenue of $8.2B, up 3% year over year, or 6% growth on an F/X neutral basis. We’re pleased with the most recent launches of paid sharing, and while we could have launched broadly in Q1, we found opportunities to improve the experience for members. We learn more with each rollout and we’ve incorporated the latest learnings, which we think will lead to even better results. To implement these changes, we shifted out the timing of the broad launch from late Q1 to Q2. While this means that some of the expected membership growth and revenue benefit will fall in Q3 rather than Q2, we believe this will result in a better outcome for both our members and our business.”
Netflix stock closed Tuesday at $333.70 per share. The regular U.S. stock markets will reopen at 9:30 a.m. ET.
The streamer will release a pre-recorded interview with new Ted Sarandos and new co-CEO Greg Peters, following the shift of co-founder Reed Hastings to chairman, discussing the quarter in greater detail at 6 p.m. ET.
