Internet television network Netflix (NFLX) crushed Wall Street’s first-quarter targets late Thursday but missed insights with its sales outlook. Netflix shares fell in extended trading.
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The Los Gatos, California-based company added 9.33 million subscribers in the March quarter. Analysts polled by FactSet expected 5.48 million new subscribers. Netflix ended the first quarter with a total of 269.6 million subscribers worldwide.
Netflix earned $5.28 per share on revenue of $9.37 billion in the first quarter. Analysts had modeled earnings of $4.52 per share on revenue of $9.28 billion. On a year-over-year basis, Netflix’s revenue rose 83%, while revenue rose 15%.
Netflix’s Q1 report marked the company’s third consecutive quarter of accelerating revenue growth.
Netflix stock slides on sales guidance
For the current quarter, Netflix expects earnings of $4.68 per share on revenue of $9.49 billion. Wall Street expected second-quarter profit of $4.54 per share on revenue of $9.52 billion. Netflix’s guidance would translate into year-over-year growth of 42% in profits and 16% in revenue.
In after-hours trading on the stock market today, Netflix stock fell more than 3% to 589. During the regular session Thursday, Netflix stock fell 0.4% to close at 611.15.
Heading into the earnings report, Netflix stock has trended sideways over the past two months.
Netflix focused on increasing profits
In a letter to shareholders, Netflix management noted the company’s improved profitability. Netflix’s operating profit margin rose to 28.1% in the first quarter, compared to 21% in the year-earlier period.
For the full year, Netflix increased its target operating margin from 24% to 25%. The company’s operating margin was 21% in 2023 and 18% in 2022.
“We have built a hard-to-replicate combination of a strong (content slate), superior recommendations, broad reach and intense fandom that drives healthy engagement on Netflix,” the letter said. “Improvement in these key areas is the best way to satisfy our members and continue to grow our business.”
Popular original TV series on Netflix in the first quarter included “3 Body Problem,” “Avatar: The Last Airbender” and “The Gentlemen.” Major original films on the service included ‘Damsel’, ‘Rebel Moon – Part One: A Child of Fire’ and ‘Society of the Snow’.
In other news, Netflix is reportedly changing its film production strategy, shifting its focus from big-name action films to more diverse offerings, the New York Times reported. Netflix also wants to save costs with the change in strategy.
Netflix stock is on three IBD stock lists: IBD 50, Big Cap 20, and Stock Spotlight.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer tech, software and semiconductor stocks.
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