Netflix flags as subscribers beat, but revenue slows in Q1 (updated)
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Updated: Netflix stock (NASDAQ:NFLX) fell as much as 12.5% after hours, but in another hour of postmarket trading largely recouped nearly all that decline, following a narrow miss on revenues and despite a beat on profits and subscriber additions in its Q1 report -- pointing to a slight decline in average revenues.
The company also announced a "broad rollout" of its paid-sharing initiative -- the password-sharing crackdown -- in the second quarter. "In Q1, we launched paid sharing in four countries and are pleased with the results," the company said.
And amid "healthy performance and trajectory" of its advertising approach -- "particularly in the U.S." -- it's "upgrading our ads experience with more streams and improved video quality to attract a broader range of consumers."
Revenues rose 3.7% year-over-year to $8.16B, a very narrow miss of analyst consensus. (They grew 8% on a foreign exchange-neutral basis, the company pointed out.)
Average paid memberships beat expectations -- they rose 4%, by 1.75M net adds, beating analyst forecasts for 1.38M -- and average revenue per member fell 1% (up 4% on currency-neutral basis).
Operating income dipped to $1.7B from a year-ago $2.0B, and operating margin fell to 21% from a year-ago 25%, which Netflix attributes to the dollar's strength.
Notably, Netflix no longer forecasts quarterly user numbers after diversifying its business into ads. It is expecting Q2 revenue of $8.2B (light of consensus for $8.47B), acknowledging that shifting its paid-sharing broad launch into Q2 from late Q1 meant some expected growth and revenue benefits would fall into Q3 rather than Q2.
It also sees Q2 operating income roughly flat at $1.6B, with an operating margin ticking down to 19% from a year-ago 20% (due mainly to dollar appreciation).
The company's executive video interview tied to earnings, moderated by BofA analyst Jessica Reif Ehrlich, will go live at 6 p.m. ET.