Thursday, April 25, 2024

Netflix Shares Plunge Over 20% After Company Says It Lost Subscribers For The First Time In 10 Years

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Topline
Shares of Netflix cratered more than 35% on Wednesday after the streaming giant reported lackluster quarterly earnings that showed its first subscriber loss in more than a decade—with the company warning that it expects to lose even more in the months ahead.

The popular streaming service lost subscribers for the first time in more than a decade.

Mario Tama/Getty Images

Key Facts

Netflix’s stock plunged over 35% following the company’s first-quarter earnings report late on Tuesday, with revenue and subscriber growth both coming in below expectations.

The streaming giant reported quarterly revenue of $7.78 billion, up 10% from last year (compared to the $7.93 billion expected), but what really spooked investors was that Netflix lost 200,000 subscribers globally in the first quarter—far below the 2.7 million additions expected.

Worse yet, the company expects to lose another 2 million subscribers this current quarter, as it blamed password sharing and increased competition from rival streaming services for slowing revenue growth.

Netflix also said that suspending its service in Russia resulted in a loss of 700,000 subscribers, but even without that unforeseen circumstance, the company would still have only added 500,000 net additions last quarter.

After the recent subscriber loss, Netflix now has some 221.6 million paying customers globally, which is down from 221.8 million in the fourth quarter of 2021.

Netflix co-CEO Reed Hastings, meanwhile, said that the company would explore offering lower-priced, ad-supported subscription tiers in a bid to attract more new customers.

Surprising Fact:
With a more than 30% drop on Wednesday, Netflix’s stock is on pace for its worst single-day performance in nearly a decade.

Crucial Quote
“Our revenue growth has slowed considerably,” the company wrote in a letter to shareholders Tuesday. “Households sharing accounts—combined with competition, is creating revenue-growth headwinds.”

Key Background
Shares of Netflix have struggled this year, falling over 40% amid the wider market selloff so far this year. Like other growth stocks, Netflix shares been especially hard-hit by surging inflation and rising rates, but a significant portion of the company’s recent struggles revolve around slowing subscriber growth amid increased competition. Rival platforms have been spending more money in a bid to gain market share as the streaming wars heat up. Facing threats from the likes of Disney+ and HBO Max, Netflix already spends the most on content, with a budget expected to reach more than $20 billion in 2022.

Further Reading
Netflix Stock Crash: Growth Story Is ‘Dunzo For Now’ As Analysts Slash Outlooks (Forbes)

Stocks Fall, Rates Climb Ahead Of Big Earnings Week That Includes Netflix And Tesla (Forbes)

Recession Calls Grow As Inflation Threatens Corporate Earnings And Rising Costs Hit Consumers (Forbes)

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