Netflix blows past earnings estimates as subscribers jump 16%

LOS ANGELES — Netflix will no longer provide quarterly membership numbers or average revenue per user starting next year, the company said Thursday as it reported earnings that beat on the top and bottom line.

Total memberships rose 16% in the quarter, reaching 269.6 million, well above the 264.2 million Wall Street had expected. However, this quarter will be one of the last glimpses investors get of the company’s subscriber base going forward.

“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 said in its quarterly letter to shareholders. “In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential.”

Netflix said now that it is generating substantial profit and free cash flow — as well as developing new revenue streams like advertising and a password sharing crackdown — its membership numbers are not the only factor in the company’s growth. It said the metric lost significance after it started to offer multiple price points for memberships.

The company said it would still announce “major subscriber milestones as we cross them.”

Netflix also noted that it expects paid net additions to be lower in the second quarter compared to the first quarter “due to typical seasonality.” Its second-quarter revenue forecast of $9.49 billion was just shy of Wall Street’s estimate of $9.54 billion

Shares of the company fell around 3% in extended trading.

Here are Netflix’s first-quarter results:

• Earnings per share: $5.28 vs. $4.52 expected by LSEG
• Revenue: $9.37 billion vs. $9.28 billion expected by LSEG
• Total memberships: 269.6 million vs. 264.2 million expected, according to Street Account

Netflix reported first-quarter net income of $2.33 billion, or $5.28 per share, versus $1.30 billion, or $2.88 per share, in the prior-year period.

The company posted revenue of $9.37 billion for the quarter, up from $8.16 billion in the year-ago quarter.

The streaming company is navigating its transformation from targeting subscriber growth to focusing on profit, as it uses price hikes, a crackdown on password sharing and an ad-supported tier to boost revenue. Investors are looking for signs that these efforts are still boosting Netflix and seeking more details about the company’s foray into video games.

Netflix could also provide more insight into its partnership with TKO Group Holdings to bring WWE to the platform. The company has teased that it would like to expand its live sports offerings.

“Today, our share of TV viewing is less than 10% in every country,” Netflix wrote. “So we have plenty of room to add value for our members and grow our share of viewing by broadening our slate, including with live events (comedy, sports, competition shows, music).”

As of Thursday morning, the company’s stock was up 27% year to date and around 85% over the last 12 months.

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