Netflix Delivers Mixed Results In First Quarter Since Reed Hastings’ Departure As Co-CEO

Dade Hayes
Updated ·3 min read
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Netflix delivered a mixed set of results for the first quarter, edging Wall Street analysts’ estimates for earnings per share but falling short in other key categories.

The consensus expectation of Wall Street analysts was for earnings per share of $2.86, revenue of $8.18 billion and a gain of 2.26 million net paid subscribers. Netflix reported EPS of $2.88, revenue of $8.16 billion and an increase of $1.75 million subscribers.

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Free cash flow zoomed to $2.1 billion compared with $800 million in the year-ago quarter. In the streaming field, Netflix’s ability to generate positive cash flow has become a major point of differentiation. While rivals like Disney+, Max and Paramount+ have racked up sizable subscriber numbers, they are struggling to get out of red numbers and into the black. Netflix has raised its full-year projection for free cash flow to $3.5 billion from an earlier target of $3 billion, well ahead of the 2022 tally of $1.5 billion.

Along with the numbers, Netflix said it had decided to execute a broad rollout of paid password sharing (in other words, charging subscribers for the formerly free act of loaning their login information to friends and family) in the current quarter. That’s later than its initial plan for the first quarter, which will push financial impacts later into 2023, but the company said it is the best timing given the need to learn from initial tests. After rolling out in four countries initially, the scheme expanded to 12 more recently and the global rollout will bring it to the U.S. in the coming weeks.

RELATED: Netflix To Launch Paid Password Sharing In U.S. In Coming Weeks As Part Of Global Rollout

Investors initially reacted negatively to the earnings report in after-hours trading, sending shares down as much as 9%, but they later recovered to within sight of break-even. Netflix stock has been making strides over the past year, nearly doubling from the dark period a year ago when the streaming giant was on its heels amid negative subscriber growth and mounting competitive pressures.

The Netflix numbers kick off what is likely to be a touch-and-go earnings season for media and tech companies, with many of them beginning the year still under a cloud due to advertising softness and economic headwinds. Over the next few days, Comcast, Spotify, Roku, Meta and Alphabet will report financials.

RELATED: ‘Perfect Match’ Reality Dating Show Renewed For Season 2 At Netflix

The results reflect the first full quarter when Netflix’s cheaper, ad-supported tier has been available in about a dozen global territories. The company made the launch a key priority in 2022, racing to bring it to market by last November.

One key metric in prior quarterly reports is no longer there: a projection for the number of subscribers in the next quarter. The company discontinued that forecast, which was often capable of moving the stock in after-hours trading, at the end of 2022.

The quarterly report also brings two more milestones in the quarter-century history of the streaming trailblazer. It will be the first time co-founder and former CEO Reed Hastings will not participate in the video interview to face analyst questions along with other top execs. He segued to an executive chairman role several months ago, with Greg Peters getting promoted to Co-CEO to join Ted Sarandos in running the company.

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