Netflix Blows Away Earnings Estimates, Subscriber Growth Continues Streaming Dominance

This announcement is part of Netflix’s ongoing strategy to focus on profit and revenue numbers rather than subscriber growth. The company said in its quarterly shareholder letter, “As we’ve noted in previous letters, we’re focused on revenue and operating margin as our primary financial metrics — and engagement (i.e. time spent) as our best proxy for customer satisfaction.” The company also pointed out that it has substantial profits and cash flow now, along with new revenue streams, thanks to its ad revenue and prevention of password sharing amongst subscribers. 

Netflix’s decision to wind down subscriber reporting is because it’s no longer the only factor in the company’s growth, and that multiple membership price points diminish its significance in reporting metrics. With that being said, the company did say that it will continue to announce major subscriber milestones. So, with its current 269 million subscribers, the company would likely make an announcement that the 300 million threshold was crossed if it wasn’t reporting subscriber numbers at the time.

Netflix also said that its second-quarter revenue would be slightly down from the first due to “typical seasonality” with a forecast of $9.49 billion, which is slightly less than the $9.54 billion that Wall Street estimated. In the meantime, the company’s shares fell about 4 percent in extended trading. Still, the company is likely glad that its $5.28 earnings per share and $9.37 billion in revenue beat out the expected $4.52 earnings per share and $9.28 billion estimates.

It remains to be seen if Netflix can keep shareholders happy with this continued growth. So far, its strategies of increasing prices, cracking down on password sharing, and adding ad revenue seem to have worked for the time being. The streamer is also looking to expand into video games, with some subscribers recently testing out the beta of this feature, along with a partnership with TKO Group Holdings to bring WWE and more live sports to the platform.

Netflix diving into the live TV world could be huge for the company, but it’s undoubtedly a tricky addition. Fellow streamers like Amazon Prime Video and Hulu have been able to incorporate sports and live TV into their strategies, so it seems likely that this would be another major revenue boost for Netflix. Still, the company has to keep subscribers happy, and some of its profit-driven decisions haven’t sat well with customers in recent months.

Netflix recently indicated that it would be focusing more on audiences and less on auteurs, which would seemingly spit in the face of successful dealings it had with people like David Fincher, Martin Scorsese, Jane Campion, and other auteurs in the past. The company’s price hikes and password-sharing crackdowns, while seemingly good for the bottom line, have also made customers unhappy. But for now, it seems like the steamer is getting what it wants.

Source: Netflix Shareholders Report