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It turns out Netflix’s crackdown on password-sharing, which was expected to tank its revenue and profits, was the right move after all. Netflix’s financial performance in the first quarter has left investors pleasantly surprised, with the streaming giant’s operating income soaring by an impressive 54 percent.
This surge comes alongside the addition of a whopping 9.3 million new subscribers globally, which highlights that the long-term impact of its measures against password sharing has surpassed the knee-jerk reactions analysts had.
The company reported earnings of $5.28 per share, surpassing Wall Street’s predictions of $4.51. The streaming giant’s operating income reached $2.6 billion, a massive jump from the $1.7 billion reported almost a year ago.
The total number of subscribers now stands at 269 million, which is an impressive 16 percent increase from the previous year.
In a noteworthy move, Netflix also announced its decision to cease disclosing subscriber numbers starting next year, a metric considered vital for investors in the streaming industry.
Instead, the company intends to shift its focus towards engagement metrics, such as the amount of time subscribers spend on the platform, and explore new revenue streams like advertising.
However, the decision to halt reporting subscriber numbers each quarter, starting in 2025, has triggered a reaction from investors, leading to a more than 4.5 percent drop in share prices during after-hours trading.
While Netflix shares have soared by 30 percent this year, outperforming the broader market, the company is banking on sustained engagement to drive future growth. The success of certain shows in the first quarter includes the viewership of “Fool Me Once,” along with popular series like “Griselda” and “3 Body Problem.”
Going ahead, Netflix expects its revenue growth to be between 13 and 15 percent for the entire year.
In its letter to shareholders, Netflix underscores engagement as the primary indicator of customer satisfaction and plans to announce significant subscriber milestones as they occur.
With a focus on time-spent-viewing metrics, Netflix aims to redirect investor attention toward metrics that offer more significant growth potential in the long term.
