Netflix’s global subscribers climbed by 9.3m to 269.6m in the first quarter of 2024 and revenue increased 14.8% year-on-year to $9.4bn, beating analysts’ expectations on both counts.
The streamer said starting in Q1 2025 it will stop reporting quarterly membership numbers and average revenue per member and focus on its “primary financial metrics” like revenue, operating income, profit, earnings per share, and free cash flow.
Q2 revenue guidance of $9.49bn was below Wall Street estimates, causing stock to fall more than 5% after closing to $581.
However Q1 numbers were strong. The ad-supported tier is entering its second year and business grew 65% since last quarter; the company continues with its password sharing crackdown in households; and executives reported strong engagement with film and television, which can be related to lower churn.
Operating income grew by 54% from $1.7bn in Q1 2023 to $2.6bn, and operating margin climbed from 21% to 28%.
Earnings per share for the first quarter reached $5.28 compared to $2.88 last year and ahead of the company’s $4.49 forecast. Netflix reported free cash flow of $2.14bn. The company’s revenue growth forecast for the year is between 13% and 15%.
The ad-supported tier is one plank in the streamer’s growth strategy and Netflix said more than 40% of new members signed up for the ad-supported tier in countries where it was available.
Netflix has partnered with Kantar and Lucid to raise brand awareness and recall, and with Nielsen Catalina Solutions for sales.
Co-CEO talks quarterly subs decision
Co-CEO Greg Peters elaborated on the decision to stop reporting quarterly subscriber numbers in Q1 2025. Talking on the earning call, he said that as the company evolved and added advertising and “extra member” features, the “historical simple math” it calculated by multiplying number of members and monthly price had become less accurate in capturing the state of the business.
Peters added, “We’ll periodically update when we grow and hit major milestones.” The company said that with more than two people per household on average, its global audience is now close to half a billion.
Executives place a premium on engagement and the company now publishes a biannual report. ”We believe it’s the single best indicator of member satisfaction with our offering,” said co-CEO Ted Sarandos, who added it reduced churn and drove the streamer’s “north stars”: engagement, revenue and profit.
Q1 film hits included J.A. Bayona’s Spanish Oscar-nominated and multiple Goya winner Society Of The Snow. The survival story ranks as the streamer’s second most popular non-English language movie ever on 98.5m views, calculated as hours viewed divided by runtime for each title, based on the first 91 days of release.
Juan Carlos Fresnadillo’s action adventure Damsel starring Stranger Things’ Millie Bobby Brown drew 123.9m views. Because it has been on the platform for less than 91 days, the calculation spans launch date to April 14.
UK shows Fool Me Once drew 98.2m, while The Gentlemen garnered 61m and has been in release for less than 91 days, as have the predominantly Spanish-language Griselda starring Sofia Vergara on 66.4m, and The Last Airbender on 63.8m.
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