Netflix outpaced its own gloomy quarterly forecasts, stemming subscriber losses and posting higher revenue despite a more competitive streaming landscape and challenging economic environment.
The company’s financial results, released after Tuesday’s market close, were widely anticipated. Though the loss of 970,000 paying users might typically not pass for good news, it’s a veritable win compared with the 2 million the company had expected for the three-month period that ended June 30. That sent investors rushing in, powering the stock up nearly 8 percent in after-hours trading.
Shares surged 5.6 percent ahead of Tuesday’s release, closing at $201.63, amid a broad rally that sent the Dow Jones industrial average up more than 750 points, or 2.2 percent. The broader S&P 500 index and tech-heavy Nasdaq ended even higher, up 2.8 percent and 3.1 percent, respectively, as investors appeared buoyed by better-than-expected quarterly earnings that showed businesses were managing withering inflation and despite recession fears.
“Our challenge and opportunity is to accelerate our revenue and membership growth by continuing to improve our product, content, and marketing as we’ve done for the last 25 years, and to better monetize our big audience,” Netflix said in the report.
Netflix generated nearly $8 billion in revenue, an 8.6 percent increase over the same period last year, although the rate of growth is slowing and the company projects it to continue to ease. Netflix expects a gain of 1 million paid subscribers next quarter.
The company attributed its slowing revenue growth to a range of issues, including higher adoption rates of connected TVs, more streaming competition, account sharing and broader factors like sluggish economic growth and the war in Ukraine.
To beef up sales, the company said it will focus on evolving and improving its revenue lines, including a widely anticipated ad-based subscription plan and clamping down on free password sharing.
Netflix will introduce its ad-supported tier in a handful of markets first, the company said, in places where spending on advertising is already significant.
“Over time, our hope is to create a better-than-linear-TV advertisem*nt model that’s more seamless and relevant for consumers, and more effective for our advertising partners,” the company said.
Last week, the company announced that Microsoft, which doesn’t have a streaming service of its own, would serve as Netflix’s global advertising technology and sales partner.
In addition to considering lower-cost plans, Netflix is also trying to wring money out of the 100 million households that share passwords and access the service without paying. The company is expanding efforts to charge subscribers an extra fee to view content from outside their primary residence. The company said its goal is to release a paid sharing offering in 2023.
The financial results come at a challenging time for the company. Netflix is beset with its own struggles in producing troves of content while Wall Street had punished the technology sector at large this year. The Nasdaq has slumped 25 percent in 2022 as tech stocks give back the staggering gains they saw in the initial phase of the coronavirus crisis.
Netflix shed 200,000 subscribers in the first quarter, its first decline of paying customers in more than a decade. Worse, the company projected steeper losses to come. For a tech giant whose story was fueled by subscriber growth and was a member of the elite FAANG stocks — the others are Facebook (now Meta), Amazon, Apple and Google (now Alphabet) — a shrinking user base can spell doom. Shares fell by more than a third in April, during the last earnings report. Despite the winning day, the company is down by 66 percent for the year.
“The world shifted under their feet,” said Andrew Rosen, founder of the streaming newsletter PARQOR, which is published on The Information. Like other economic trends accelerated by the pandemic, Netflix enjoyed a spike in demand as consumers were forced to spend more time at home, compressing what might have been years of growth into a matter of months. The unsustainable climb also was met with production issues stemming from the virus, Rosen said. “Their story before then was growth. And now that story’s gone,” he said.
Meanwhile a host of competitors are vying for attention and streaming dollars. Disney Plus, Prime Video, HBO Max and Paramount Plus helped transform the streaming world, leaving consumers to manage multiple subscriptions if they want to watch hit television shows scattered across services.
“They are losing subscribers in the US and Europe because of competition, recession, inflation, and general fears about the economy.” said Michael Pachter, an analyst for Wedbush Securities. He said that Netflix will continue to grow as people cut the cable cord and as they offer a cheaper ad-supported option. “The important thing is for them to adjust spending in a low-growth environment,” he said.
Eighty-five percent of U.S. households subscribe to at least one streaming service, according to Kantar Group, a data analytics company, with the average home subscribing to nearly five. Americans streamed nearly 15 million years’ worth of content last year, according to the research firm Nielsen.
The war in Ukraine also has eaten into the company’s viewership, underscoring the far-reaching ramifications of the geopolitical conflict and the company’s global reach. The streaming service lost 700,000 subscribers when it pulled out of Russia following the Ukraine invasion, joining much of corporate America in attempting to isolate Moscow. But that drop-off coincides with broader viewership declines as pandemic social restrictions recede and consumers increasingly seek out entertainment away from home.
The nation’s economic climate has also worsened. Consumers face record-high inflation while the Federal Reserve pursues an aggressive monetary policy intended to tamp down on price increases and cool the economy. But the efforts also carry the risk of sparking a recession. As consumers adjust their spending to account for more expensive housing, fuel and grocery costs, canceling subscription services could become a budget-tightening measure of first resort.
But the streamer is also chasing new lines of revenue and new audiences. Following its announcement last summer that the company intended to explore the market for video games, Netflix has hired multiple executives to significant positions in its gaming division in recent months. It has also releasing mobile games like “Stranger Things: 1984.”
FAQs
Though the loss of 970,000 paying users might typically not pass for good news, it's a veritable win compared with the 2 million the company had expected for the three-month period that ended June 30. That sent investors rushing in, powering the stock up nearly 8 percent in after-hours trading.
Why did Netflix lose 1 million subscribers? ›
Why Netflix Suffered Subscriber Losses? Netflix revealed that it had lost 1 million members for the first time in two decades; it claimed that it was a result of rising inflation and increasing competition in the streaming market. Price increases are also the reason behind the loss of Netflix subscribers.
Why is Netflix losing stock value? ›
Netflix's stock has been battered and bruised in 2022 as it has had to contend with rises in inflation, consumers cutting back on discretionary spending, and increased streaming competition, which has vastly changed the landscape of the industry.
Is Netflix losing subscribers due to password sharing? ›
It's one of the first major streaming services to put limits on password sharing, a move that comes after Netflix experienced its first subscriber loss in a decade—losing almost a million during the summer of 2022, though it regained those declines in the second half of the year.
What is the downfall of Netflix? ›
Netflix has blamed their subscribers loss on competition with other companies. A lot of companies, such as Disney and NBC, created their own streaming services, which drew a lot of attention away from Netflix. With the launch of Disney Plus in 2019 and Peaco*ck in 2020, the popularity of Netflix was bound to decline.
Did Netflix lose subscribers because of price increase? ›
Netflix raised prices this year, and amid an increasingly worrisome economic climate, the move may have significantly impacted subscriptions. That's one takeaway from a new report from Attest, a consumer research firm.
How fast is Netflix losing subscribers? ›
Netflix lost 200,000 subscribers in the first quarter, and nearly one million in the second. “After a challenging first half, we believe we're on a path to re-accelerate growth,” Netflix said in its quarterly letter to shareholders.
Why is Netflix stock rising? ›
Key Points. Netflix's stock is up 150% since bottoming last June, and is up 43% so far in 2023. The evidence suggests that Netflix's Standard with Ads tier is making solid progress, as is its digital ad business. The end of password-sharing appears to be going much better than many investors imagined.
Is Netflix struggling financially? ›
The streaming pioneer has been reeling under strained consumer spending, rising costs of financing production and increased competition from Disney+ and Amazon Prime.
How much has Netflix lost in stock? ›
Cahall's call on Netflix (ticker: NFLX) comes as the stock has lost about 47% this year, versus the S&P 500's 17% fall. The streaming video company reported losses in subscribers for the first two quarters of 2022.
“The Netflix service and any content accessed through the service are for your personal and non-commercial use only and may not be shared with individuals beyond your household unless otherwise allowed by your subscription plan.”
How much Netflix cost a month? ›
How much Netflix costs per month. Netflix currently offers four streaming plans: Standard with Ads, Basic, Standard, and Premium, starting at $6.99 per month and ending at $19.99 per month. It will cost more to add another user to a subscription plan.
How much does Netflix make a year? ›
Netflix's annual revenue in 2022 increased by 6.46% from 2021 to $31.616 billion. Likewise, the streaming giant's annual revenue for 2021 increased from 2020 by 18.81% to $29.698 billion.
What is Netflix's biggest issue? ›
Major Issues
- No More Subscribers Left in the U.S. Netflix already has nearly 47 million subscribers in the U.S. This constituted more than half of Americans. ...
- Difficult International Growth. ...
- Reliance on Media Companies.
Netflix Admits They'll Lose Some Subscribers Due to Crackdown on Password Sharing. While Netflix recently announced a huge increase in subscribers, they're also aware that their new password-sharing strategy might not be popular.
Why is Netflix losing so many titles? ›
Netflix licenses TV shows and movies from studios around the world. Though we strive to keep the titles you want to watch, some titles do leave Netflix because of licensing agreements. Whenever a TV show or movie license is expiring, we consider things such as: If the rights to the title are still available.
Why will Netflix lose 2 million subscribers? ›
“They are losing subscribers in the US and Europe because of competition, recession, inflation, and general fears about the economy.” said Michael Pachter, an analyst for Wedbush Securities. He said that Netflix will continue to grow as people cut the cable cord and as they offer a cheaper ad-supported option.
Did Netflix cause inflation? ›
For example, Netflix spent $17 billion on original content alone in 2021, Staker said. “The increase in expenditures and inflation hiked up prices for customers,” said Stacker about Netflix.
Is Netflix in debt? ›
What Is Netflix's Debt? As you can see below, Netflix had US$14.4b of debt, at March 2023, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of US$7.83b, its net debt is less, at about US$6.61b.
How many Netflix subscribers dropped? ›
That's the good news. Netflix reports that it lost nearly 1 million subscribers in the second quarter of 2022, but that was better than the 2 million it had forecast. The media world — especially in streaming — breathed a huge sigh of relief Tuesday.
One of Netflix's primary competitors is Amazon Prime Video. Also, simply known as Prime Video, Amazon Prime Video is a subsidiary of the American multinational technology company, Amazon.
Is Netflix stock expected to grow? ›
Stock Price Forecast
The 35 analysts offering 12-month price forecasts for Netflix Inc have a median target of 390.00, with a high estimate of 535.00 and a low estimate of 250.00. The median estimate represents a -11.52% decrease from the last price of 440.78.
Is Netflix stock a buy or hold? ›
Netflix's analyst rating consensus is a Moderate Buy.
What will Netflix stock be worth in 5 years? ›
According to the latest long-term forecast, Netflix price will hit $500 by the end of 2023 and then $600 by the middle of 2024. Netflix will rise to $800 within the year of 2025, $1000 in 2026, $1200 in 2027, $1300 in 2028, $1500 in 2029, $1600 in 2031, $1700 in 2032, $1800 in 2033 and $2000 in 2035.
Is Netflix going to survive? ›
As for the Netflix streaming service, it will continue to run during 2023 and beyond.
Is Netflix hurting financially? ›
The business is actually burning cash most years, despite the strong profits on its income statement. Netflix borrows money to help fund content, and it currently has a net debt (total debt minus cash) balance of $9.4 billion.
How Netflix can improve? ›
5 Ways Netflix Can Improve to Remain the Best Streaming Service
- Bring Back Free Trials. Everybody loves free stuff. ...
- Better Notifications for When Content Is Leaving Netflix. ...
- Capitalize on Merchandise. ...
- Redesign the "Are You Still Watching?" Feature. ...
- Ability to Share Content Directly to Social Media.
Netflix viewers will dip in 2023 thanks to paid sharing—which could cause a long-term Gen Z problem. The news: Netflix will lose viewers for the second consecutive year in 2023, according to our new forecast update. The number of viewers is expected to decrease by 0.5% to 170.6 million.
Is Netflix facing loss? ›
Netflix reported in April a surprising loss of subscribers for the first time in more than a decade. Its stock plummeted, the company lost billions in market cap, hundreds of employees were laid off and the future of the one-time media darling was in question. STRANGER THINGS.
Who holds the most Netflix stock? ›
The top shareholders of Netflix are Leslie J. Kilgore, David Hyman, Greg Peters, Capital Research Group Investors, Vanguard Group Inc., and BlackRock Inc. (BLK).
Netflix has officially begun its plan to make users pay extra for password sharing. The Netflix logo is displayed on the company's website on Feb. 2, 2023, in New York.
What is the Netflix 30 day rule? ›
After years of ignoring and even encouraging password sharing, the streaming company is asking anyone using a Netflix log-in for more than 31 days at a different location to get a separate account or pay $7.99 a month to be added to the main account.
What is going on with Netflix? ›
We are not currently experiencing an interruption to our streaming service.
Is Netflix worth it 2023? ›
Best streaming service overall
There's a reason why Netflix has become shorthand for streaming in general. The former movie rental service evolved into the top-tier streaming app that's a must-have in 2023, even if you're paying extra to share your password.
Can I share my Netflix account with family in a different home? ›
A Netflix account is for use by one household. Everyone living in that household can use Netflix wherever they are — at home, on the go, on holiday — and take advantage of new features like Transfer Profile and Manage Access and Devices. We recognize that our members have many entertainment choices.
How to get Netflix for cheap? ›
How to get Netflix cheaper subscription with a free VPN
- NordVPN – unblock cheaper Netflix subscriptions easily and safely for just $3.49/month.
- Surfshark – stream Netflix cheaply on numerous devices for just $2.30/month.
- PureVPN – enjoy a cheap Netflix subscription all year long for only $2.08/month.
The highest paying jobs at Netflix are engineering manager, senior software engineer, senior engineer, and content director. Engineering manager jobs at Netflix earn an average yearly salary of $206,840, Netflix senior software engineer jobs average $181,690, and Netflix senior engineer jobs average $167,093.
How do Netflix actors get paid? ›
Primary actors are paid for time spent filming as well as residuals for later screenings, while smaller and background actors are only paid for the initial filming. They aren't paid by Netflix itself; instead, they're paid through production companies.
Is Netflix still making a profit? ›
Yes, Netflix is profitable. It first became profitable in 2003 and has grown steadily since then, reaching a profit of $4.49 billion in 2022, a 12.2% decline from its record profit of $5.11 billion in 2021.
Why did Netflix lose $50 million? ›
The firm had enjoyed uninterrupted quarterly growth in subscribers since October 2011 but on Tuesday it admitted it was losing customers to rivals, while struggling to expand due to password sharing.
Netflix reports that it lost nearly 1 million subscribers in the second quarter of 2022, but that was better than the 2 million it had forecast. The media world — especially in streaming — breathed a huge sigh of relief Tuesday.
Why is Netflix losing subscribers in the US? ›
Netflix Hiked Up Prices in US and Canada
At the beginning of 2022, Netflix decided to increase its subscription price in the United States and Canada. Faced with the new costs, subscribers canceled their Netflix accounts instead.
Are Netflix subscribers decreasing? ›
However, in 2022, Netflix reported that it had lost 200,000 subscribers during the first quarter, which is their first subscriber decline in more than a decade. Netflix's shares also experienced a drop in its stock price, even falling 35% in a day.
What did Netflix do to lose customers? ›
Netflix is losing subscribers after cracking down on passwords, but in the long run, it may not even matter.
What is the biggest loss Netflix? ›
In Q1 2022 Netflix had announced that it had lost a record net 200,000 subscribers which is said to be the biggest drop off in over a decade.
Why is Netflix in trouble? ›
Netflix is in trouble.
One can blame all the noise from the sell-off in growth stocks, the Fed's rate hikes, rising inflation, and pessimism towards stay-at-home stocks for the crash. These factors are leading to the sell-off in Netflix but the company has other challenges too.
Is Netflix currently in debt? ›
As you can see below, Netflix had US$14.4b of debt, at March 2023, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of US$7.83b, its net debt is less, at about US$6.61b.
Where did Netflix lose its subscribers? ›
Netflix Loses One Million Subscribers in Spain Due to Crackdown on Account Sharing. Netflix's new pricing strategy has come at a great cost to the company.
How many Netflix subscribers left? ›
How many paid subscribers does Netflix have? Netflix had around 232.5 million paid subscribers worldwide as of the first quarter of 2023.
