Profits at Netflix have surged as the world’s largest streaming service added millions of new paying subscribers.
The entertainment giant added 9.3 million subscribers in the latest quarter – more than expected by analysts on Wall Street – leaving it with a record 269.6 million worldwide.
“We’re off to a good start in 2024,” the company said. Its shares dropped 2% during out-of-hours trading on Thursday, however, after rallying by almost a third since the turn of the year.
While still churning out hit series including Fool Me Once, 3 Body Problem and The Gentlemen, to broaden its service Netflix is also investing in live events, including coverage of World Wrestling Entertainment and videogaming.
In a letter to investors on Wednesday night, the company announced it would stop reporting how many paying subscribers it has starting next year.
Revenue at Netflix rose 15% to $9.4bn in the three months to 31 March. Net income jumped 79% to $2.3bn over the same period, clearing analysts’ expectations.
Netflix, based in Los Gatos, California, pioneered the streaming revolution. Hollywood’s established giants, from Disney to Warner Bros, are still scrambling to catch up – and turn a profit on their own rival digital services.
A boom in subscribers early in the pandemic, with much of the world stuck at home, stuttered in 2022 as restrictions were lifted and viewers ventured beyond their sofas. But shares in Netflix have surged over the past two years as the company shored up growth by cracking down on password sharing and introduced a cheaper tier of its service, with advertisements.
As it has regained momentum following its post-pandemic growth struggles, Netflix has been trying to steer Wall Street’s focus away from its subscriber growth numbers, arguing that other financial metrics including sales were more important.
Forecasting sales growth of up to 15% this year, the company said on Thursday that to achieve “healthy” long-term growth it will need to “improve the variety and quality” of movies, shows and games on its platform, make it easier for users to find new series and build its ad-funded tier into a “more meaningful contributor” to its business.
Netflix is “already the indisputable winner of the streaming wars,” Michael Nathanson, senior analyst at Moffett Nathanson, wrote to clients earlier this week. Upgrading his annual profit forecasts for the group, he said Netflix’s crackdown on password sharing had reaccelerated growth across the US and Canada.
“That said, we continue to remain cautious of pie-in-the-sky forecasts that see this hockey stick continuing indefinitely,” Nathanson added, noting that “fewer and fewer” households in the region have yet to subscribe to Netflix.
