Netflix earnings: Subscriber growth crushes estimates

Netflix (NFLX) reported first quarter results that beat Wall Street expectations. Earnings per share of $5.28 top estimates of $4.52. Revenue of $9.37 billion was better than expectations of $9.26 billion. The streaming giant added 9.33 million paid subscribers, crushing estimates of 4.84 million.

For the second quarter, Netflix sees earnings of $5.28 per share, well above the expected $4.52. The revenue estimate of $9.49 billion was just about in line with estimates of $9.51 billion.

Yahoo Finance's Julie Hyman and Myles Udland discuss the breaking results.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Stephanie Mikulich.

Video transcript

JULIE HYMAN: But actually creeping into the top spot, Myles, in the last few moments on the trending ticker page was Netflix.MYLES UDLAND: That's right.Netflix, first quarter results.They are out.Let's go through the numbers here just quickly on the headlines that we have.Company earning $5.28 per share in the first quarter.That's better than the $4.52 that was expected by analysts.Company also reporting first quarter streaming paid net change in subscribers up about 9.3 million.The Street was looking for a 4.8 million increase in the number of subscribers.Now revenue here slightly light, or rather the guidance slightly light.So first quarter revenue, $9.37 billion.Street was looking for $9.26.Looking out to the second quarter, we see revenue's $9.5 billion.$9.49 to be precise.$9.51 billion is what the Street was looking for on Q2.Stock's been a little bit volatile here.It was down as much as 4%.Now it's up 1%.Another headline for Netflix watchers-- this is going to make our job a little bit less fun next quarter Julie, or at least into next year.They're going to end reporting quarterly membership numbers next year.JULIE HYMAN: I wonder why they're going to do that.MYLES UDLAND: Well, there's two reasons why companies change their reporting structures.One, the numbers are about to get worse, or two, the company is about to have some kind of other bigger change that we don't know about yet.Maybe, right?JULIE HYMAN: That's intriguing.MYLES UDLAND: Or just-- you know.They just decided they don't want to do it anymore.They're tired of playing that game.But-- JULIE HYMAN: I have to say, besides the second quarter revenue forecast miss, which is a very slight miss, otherwise, these numbers look very, very strong.MYLES UDLAND: Investors agree with you.Stock's now up 4%.JULIE HYMAN: But it leads me to believe that maybe people are reading something into-- the fact that the stock is not doing less bad, or doing a little bit better in after hours, right-- it's up now.MYLES UDLAND: Yeah JULIE HYMAN: Initially, it was trading-- MYLES UDLAND: That's right.JULIE HYMAN: I'm outdated.MYLES UDLAND: Well, you know what it is?It's the old, you know, did you read the call yet?Did you hear the call?JULIE HYMAN: Yeah.So we'll see what happens.But I do wonder-- I mean, there will be questions presumably around the ending of those quarterly membership number reporting.But that first quarter streaming paid net change number is just such a huge beat.You have to wonder what's going on there.That 9.3 million add versus 4.8 million expected.Is that because people got kicked off of password-sharing?And so, they were forced to pay up.I mean, that still seems like a huge number, even if you account for that.MYLES UDLAND: You know, I think looking at the letter here-- and Netflix always has a great shareholder letter for, you know, for viewers and listeners who don't always go into the nitty gritty of Netflix.They spend a lot of time in here talking-- they have a whole section-- the subhead is engagement, and talking about-- you know, they're big on minutes watched, or how many minutes have been consumed, or how many views-- and we can debate what counts as a view and all here.But they're running through quite a few numbers.We can all read them for ourselves.But basically calling out here with more than two people per household on average in the countries where Netflix is available, they have an audience of over 1/2 billion people is how they are framing it.So they are now approaching the billion-- let's call it the billion user landmark, right?And we can say what's the TAM of Netflix.Well, they're approaching-- I don't want to say, like, the edge of the TAM.TAM always gets bigger.Population generally grows.But they are approaching a number-- a point at which it's going to be a different story, especially, like-- this is what?The third wave of growth for Netflix.The re-acceleration out of the pandemic has been what's gotten everybody so excited about the stock.And with the focus on engagement, they are talking down their viewership share, right?They say our share of TV viewing is less than 10% in every country.So I think the implication is they would like their share of viewing to go up.They want the engagement on the platform to go up.They've released an ad-supported tier.They've had huge subscriber growth.But they want to stop talking about it.So really, we're just looking at a different framing.You know, it takes a long time to steer a big ship like this.Netflix is trying to reframe the story they are telling themselves, and that they want investors to be telling themselves around what there is to get excited.I mean, listen.What do we know?Stock's down 4%, up 4%, down 2%.But I just think that's my, you know, five-minute read through skimming the letter.Like, that's what I got so far.If anybody has better ideas, you know, we'll talk about it later.JULIE HYMAN: What's your Netflix show right now?MYLES UDLAND: What do you mean?How much for personally?JULIE HYMAN: What are you watching?MYLES UDLAND: Like, hardly anything.JULIE HYMAN: No Bluey?No-- MYLES UDLAND: Bluey's Disney+ JULIE HYMAN: Oh, right.My kids are aged out of.We watched Avatar: The Last Airbender.The live action.MYLES UDLAND: So we did-- we did Love Is Blind, because the whole-- were you up on this?Oh, OK. Well we'll talk about it offline.It was-- you know, it delivered on, like, completely mindless television.JULIE HYMAN: OK. MYLES UDLAND: So it's fine.I'll keep paying the 16 bucks a month, or whatever.