Are Netflix’s best days behind them? 🤔 Betteridge’s law of headlines doesn’t apply to this inquiry, because we’re genuinely asking. The streaming giant lost 200,000 subscribers in Q1 2022, marking the service’s first contraction in subscribers in a freaking decade.
The first quarter of every year was long a growth story for Netflix, which usually had strong “runoff” from Q4 success before the pandemic. Q1 2020 was one of the company’s most successful quarters ever, thanks to the pandemic and stay-at-home orders — Netflix added over 15 million subscribers.
And even Q1 2021, at 3.98 million net new subscribers, was heads and toes above the latest report. By comparison, a negative overall growth rate in subscribers is… shocking. Back in January, we reported on Netflix’s Q4 2021 earnings. At that time, the company was expecting more than 2.5 million new subscribers this quarter.
They didn’t even come close. 💀
As you’ve probably already concluded from these lackluster figures, this has been very bad for $NFLX stock — it’s down 25% in afterhours. It took a number of other streaming-facing companies down with it, too…
However, Netflix is making its best effort to put out this dumpster fire before it becomes a full-blown Californian wildfire.
The streaming company already raised subscription prices pretty aggressively, which might be a factor weighing on this unexpected subscriber deficit. However, raising prices has been a huge help for the company’s financials: even with a net loss in subscribers, Netflix’s revenue was little changed QoQ (it actually grew +2% to $7.868 billion in revenue). Although, the company was showing signs of quarter-by-quarter slowdown in its YoY growth (from +24.2% YoY in Q1 2021 to just +9.8% YoY in Q1 2022.)
Netflix expects more of the same in Q2 2022. The company’s forecast indicates that it’s expecting to make roughly $185 million more (to $8.053 billion in revenue) in the quarter, while 2 million subscribers are expected to dip. 🚪
Even with the projected net loss in Q2, Netflix will still be up +5% YoY on subscriber growth, sitting large-and-in-charge at 219 million subscribers. However, the company isn’t shy about headwinds in its report: Netflix sees password sharing, other streaming services, macro factors such as inflation, and the slow transition to connected TVs as ideological obstacles to its growth.
$NFLX is now down 41% YTD.