Netflix Inc. posted its best start to the year since 2020, attracting more new customers than anyone expected thanks to a strong slate of original programs and a crackdown on password sharing.
According to a statement Thursday, Netflix added 9.33 million customers in the first quarter of 2024, nearly doubling the 4.84 million average of analysts’ estimates. The company attracted new customers worldwide, showing particular strength in the US and Canada. Those new subscribers also helped Netflix beat forecasts for sales and earnings.
Expectations for Netflix’s first quarter have soared recently, as one analyst after another published rosy forecasts. The company delivered on expectations and signalled the growth would continue. Sales will grow by about 16 per cent in the current second quarter “- a slight increase from the first “- the company predicted in a letter to shareholders. The company said new subscribers will be lower this period than the first, citing seasonality.
Netflix has rebounded from a slowdown in 2021 and 2022 to grow at its fastest rate since the early days of the coronavirus pandemic. That is due in large part to its crackdown on people who were using someone else’s account. The company estimated more than 100 million people were using an account for which they didn’t pay. While executives at Netflix feared a backlash from customers, the company has convinced millions of moochers to pay for access.
Those new customers have had plenty to watch. Netflix has delivered a new hit every couple of weeks so far this year, including limited series such as Fool Me Once and Griselda, the dramas The Gentleman and 3 Body Problem, and the reality show Love is Blind. The streaming service accounts for about 8 per cent of TV viewing in the US and is a leading TV network in most of the world’s major media markets.
“With more than two people per household on average, we have an audience of over half a billion people,” the company said in the letter to shareholders. “No entertainment company has ever programmed at this scale and with this ambition before.”
Recent growth has lifted Netflix’s share price back toward record highs. They were trading at more than $608 near the close Thursday, giving the company a market value of more than $260 billion. However, it was still about 12 per cent off its closing high of $691.69 in November 2021.
Starting with the first quarter of 2025, Netflix will stop reporting paid quarterly membership and revenue per subscriber. Those metrics have long been the primary way Wall Street evaluates the company’s performance, but Netflix has tried to shift the focus to traditional metrics like sales and profit. Management will continue to report significant subscriber milestones.
Some analysts worry that Netflix is once again trading at a valuation that far exceeds the business’s fundamentals. The company delivered sales of $9.33 billion, rising 15 per cent and beating estimates of $9.26 billion. Above projections, net income grew to $2.33 billion, or $5.28 a share.
Those figures are below those of companies with smaller market values. The boost from the crackdown on account sharing is temporary, and Netflix executives have been reluctant to put a firm timetable on when that growth would stop.
Yet even sceptical analysts have been impressed with the company’s recent performance, lifting their price targets for investors. To sustain its growth going forward, Netflix has also introduced a cheaper, advertising-supported version of its service targeting cost-conscious customers. It’s also begun to invest in live programming, including stand-up specials, wrestling and an upcoming boxing match.
About 40 per cent of Netflix’s new customers select the advertising option in markets where its available, the company said. The advertising tier is still minuscule relative to online video giants like YouTube.
