Netflix Q1 2024 Earnings
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The company’s revenue surged by 14.8%, buoyed by a 9.3M increase in subscribers.
Netflix for Q1 2024 reported subscriber growth of 16% on a year-on-year basis with another 9 million-plus subscribers added during the first quarter bringing the total up to 269.60 million subscribers as of March 31.
Membership for the company's ad-supported streaming service increased by 65% compared to the previous quarter, highlighting advancements in its strategy to boost ad revenue, and aiming for it to play a more substantial role in its business.
For Q1 2024 Netflix reported revenue of $9.37 billion, which increased by 14.8% compared to the same period last year driven by various revenue strategies such as efforts to combat password-sharing, the introduction of an ad-supported tier, and recent price adjustments on specific subscription plans.
The streaming pioneer’s operating income grew by 54% totaling to $2.6 billion for the first quarter of 2024 driven by higher-than-anticipated revenue by the company and the timing of the content spend. Also, the operating margin of 28% marked a seven-percentage-point increase year over year.
Following a remarkable fourth quarter of 2023, which saw an outstanding addition of 13.1 million subscribers—a record for Netflix in Q4—the company has delivered another impressive performance in Q1. However, despite this consecutive growth worth celebrating, Netflix has announced its decision to cease reporting quarterly subscriber totals and average revenue per member (ARM) starting in 2025. This move is likely to surprise an industry that has long been driven by the competition for streaming subscribers.
Netflix further explained that "In our quarterly letter to shareholders, we emphasized our focus on revenue and operating margin as our primary financial metrics, with engagement, measured by time spent, serving as our key proxy for customer satisfaction," the company stated. "During our early stages, when revenue and profit were limited, membership growth served as a significant indicator of our future potential."
Netflix has indicated that with its significant profit generation, positive free cash flow, and the development of new revenue streams such as advertising and measures to combat password-sharing, membership numbers no longer solely dictate the company's growth trajectory. It highlighted that the significance of this metric diminished as it began offering multiple price points for memberships.
However, the company stated that they would report major subscriber and ARM milestones as and when they would cross them.
Net income for Q1FY24 stood at $2.33 billion, or $5.28 per share, compared to $1.30 billion, or $2.88 per share, in the same period last year.
Netflix executives outlined their primary objectives, which include enhancing the diversity and quality of their entertainment offerings, spanning television shows, movies, and games. The appointment of Dan Lin as the new head of the film division reflects this commitment to excellence.
"Even though we have produced and continue to produce great films, our aim is to elevate their quality," stated Ted Sarandos, co-chief executive. He emphasized that there was no necessity to increase expenditure on content.
Furthermore, the streaming giant has been expanding its presence in sports-related content, evidenced by a $5 billion agreement to live stream World Wrestling Entertainment's flagship Raw program in the US over the next decade. Additionally, it will offer a live stream of a bout between Mike Tyson and Jake Paul in July. Despite these moves, analysts are questioning whether Netflix intends to delve deeper into live sports. Sarandos clarified, "We're not opposed to sports, but focused on profitable growth."
For Q2 2024, the company anticipates a revenue growth of 16%. Also, Netflix expects a decrease in paid net additions compared to Q1 2024, attributed to typical seasonal patterns.
Looking at the full year 2024, the company forecasts robust revenue growth ranging from 13% to 15%. Netflix has adjusted our FY24 operating margin expectation to 25%, up from the previous forecast of 24%.
On April 18, 2024, Netflix's shares fell 4% in after-hours trading, partially attributed to a weaker full-year revenue growth outlook that fell short of some analysts' estimates.
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