Streaming giant Netflix’s crackdown on password sharing appears to be working for the company, which gained more than 9 million subscribers in the first quarter of this year and saw its profits soar, according to its latest earnings report published on Thursday.
The Los Gatos, California-headquartered platform said it attracted approximately 9.33 million subscribers in the three months of 2024, far surpassing Wall Street’s expectations of 4.8 million net adds.
Overall, the platform now has a total of 269.60 million paying subscribers globally, it said.
Elsewhere, the company said its profits in the first quarter jumped to more than $2.3 billion, while revenue for the first quarter rose by nearly 15 percent year over year, to $9.37 million, beating Bloomberg consensus estimates of $9.27 billion.
Earnings per share (EPS) also beat estimates in the first quarter of the year, with the company reporting EPS of $5.28 compared to $2.88 last year and well above analysts’ expectations of $4.52.
Crackdown on Password Sharing
Its new cheaper, ad-supported option also saw more action, with the company reporting a 65 percent growth in its ads membership quarter over quarter after rising nearly 70 percent in the previous two quarters.
Over 40 percent of signups in its markets that offer the ads tier are to that option, it said.
The company also increased the price of its standard “basic” plan in 2022.
Netflix Announces Upcoming Changes
While the unexpected decision will make it harder to track the video streaming service’s growth, Netflix noted it has established itself as a key player and no longer needs to use membership growth as a gauge for future success.“As we’ve noted in previous letters, we’re focused on revenue and operating margin as our primary financial metrics—and engagement (i.e., time spent) as our best proxy for customer satisfaction,” the company wrote in the letter. “In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential. But now we’re generating very substantial profit and free cash flow (FCF).”
The company still plans, however, to give annual updates on total subscribers, it said.
Netflix also noted it is developing new revenue streams, including advertising its extra member feature, and therefore “memberships are just one component of our growth.”
“In addition, as we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the streamer continued. “It’s why we stopped providing quarterly paid membership guidance in 2023 and, starting next year with our first-quarter 2025 earnings, we will stop reporting quarterly membership numbers and ARM [average revenue per membership].”
Shares of Netflix were down 0.41 percent in extended trading late Thursday.
