Streaming giant Netflix has announced a profit exceeding $2.3 billion for the first quarter of 2024, as detailed in a letter to shareholders which also outlined the company’s quarterly activities. This profit reflects a substantial 14.8% year-on-year growth.
In addition to its profit increase, Netflix reported a significant rise in its user base, adding 9.3 million new subscribers during the quarter. This surge boosts its total subscriber count to nearly 270 million worldwide. Furthermore, the company achieved an overall revenue of $9.37 billion for the quarter, marking a 15% increase compared to the same period last year.
Despite these strong financial results, Netflix shares experienced a decline on NASDAQ, falling by 5% shortly after the announcement. According to a report by the BBC, this downturn is linked to Netflix’s recent decision to discontinue the publication of subscriber growth figures starting next year, sparking investor concerns about transparency and future growth prospects.
According to the report, some investors interpreted Netflix’s decision to cease publishing subscriber numbers as an indication that the company’s rapid customer growth might be tapering off. The report also pointed out that other tech giants, such as Facebook’s parent company Meta and the social media platform X (formerly known as Twitter), have similarly stopped reporting their monthly active user figures as their growth plateaued. Such moves have raised questions about the future growth potential of these companies’ user bases.
Netflix itself acknowledged these concerns when it announced the change. The company explained that in its early years, when revenue and profit were minimal, membership growth was a vital indicator of its future potential. However, it stated that today, “subscriber numbers have become just one component of our growth.” Netflix is urging investors to instead focus on its profits and revenue, signaling a strategic shift in how it communicates its business health and priorities to the market.
Netflix subscriber growth surges after password sharing clampdown.
The first quarter report highlighted that Netflix’s recent success was partly due to its crackdown on password sharing. Starting in February 2023, the streaming giant began enforcing stricter controls on users who share passwords outside their household.
“We value our members and recognize that they have numerous entertainment options. A Netflix account is intended for one household,” stated the company during the announcement. It also introduced an additional fee for users who wish to share their passwords, as well as implemented sharing limits, predicting that these measures would boost its revenues and growth.
The crackdown on password sharing yielded positive results. In Q2 2023, Netflix saw a 2.7 percent increase in revenue, totaling $8.2 billion, and reported an operating profit of $1.8 billion, aligning with its forecasts. The platform also welcomed 5.9 million new users during the quarter.
This trend continued into Q3 and Q4 of 2023, with revenues reaching $8.5 billion and $8.8 billion, representing growth rates of 7.8 percent and 12.5 percent, respectively. Looking ahead, Netflix is projecting a revenue growth of 14.8 percent for the second quarter of 2024, aiming to reach $9.5 billion.
To achieve this, the company plans to enhance the variety and quality of its offerings, including more exceptional TV shows and movies, a robust slate of games, and compelling live programming. Additionally, Netflix aims to innovate in product development and marketing to help fans more easily discover, immerse themselves in, and discuss the stories they love, thereby fueling fandom and the so-called “Netflix Effect.”
Furthermore, the company plans to explore additional revenue and profit opportunities, particularly by scaling its advertising segment to become a more significant contributor to its business in 2025 and beyond.
“We have built a hard-to-replicate combination of a strong content slate, superior recommendations, broad reach, and intense fandom, which drives healthy engagement on Netflix. Improvement in these key areas is the best way to delight our members and continue to grow our business,” Netflix stated.
