Netflix slides after beating Q1 subscriber growth estimates but giving weak guidance for the months ahead (NFLX)

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Netflix posted its biggest quarter ever for paid subscriber growth, adding 9.6 million net paid subscribers globally.
It also beat Wall Street estimates and company guidance for revenue and earnings per share.
But the company's guidance for subscriber growth was weaker for the second quarter than Wall Street expected, and the stock slid.
Investors are keeping a close eye on subscriber growth, as competing streaming services from companies like Disney and Apple enter the fray.

Netflix posted its first-quarter earnings on Tuesday, and beat Wall Street estimates and company guidance for revenue, earnings per share, and global paid net subscriber additions during the period. But it also turned in weaker-than-expected guidance for subscriber growth in the second quarter.

Netflix added 9.6 million paid subscribers globally — its biggest paid quarterly haul ever — bringing it to nearly 149 million members worldwide. In the second quarter, it expects to add 5 million paid subscribers, about 1 million less than Wall Street estimated.

Shares of Netflix dipped around 6% in after-hours trading on Tuesday after the report was released, but quickly recovered. The stock was down around 1% after bouncing around Tuesday evening.

Netflix is being cautious in its guidance for subscriber growth, in part because of price hikes that are rolling out in the US, Brazil, Mexico, and parts of Europe, the company said in its letter to shareholders. That includes Netflix's biggest US price hike ever, which is still hitting existing US customers, and raises the price of Netflix's most popular plan from $11 to $13 per month. Netflix said it could see a small share of subscribers drop the service in the short-term, while people consent to the new prices changes.

Investors were looking for solid global subscriber growth during the periods, and for Netflix to put them at ease ahead of competition from upcoming services like Disney+ and Apple TV+, both of which were announced in the past month. Netflix lost more than $8 billion in market value since last Thursday, when Disney+ was revealed, before rebounding in trading on Tuesday.

Netflix acknowledged new competition from Apple and Disney in its letter to investors, but said it doesn't expect that to hinder growth.

Ahead of earnings, Deutsche Bank analyst Bryan Kraft argued that concerns over competition were overblown, because the family-friendly Disney+ service is not a replacement for Netflix's broad platform and its direct rival, Hulu, isn't established globally like Netflix is.

Netflix touted some of its original series that hit the service during the first-quarter, like "Umbrella Academy," which it said 45 million member households, or about one-third of Netflix's subscriber base, watched in its first four weeks on the service. It also called out the heist film "Triple Frontier," which was watched by more than 52 milion member households in its first month, and "The Highwaymen," which drew more than 40 million members during its first four weeks.

As Netflix invests more in original programming, it is also looking for new ways to help members find popular content on the service. It will begin testing, in the second quarter, a list in the UK that will highlight the 10 most popular titles across various categories, the company said.

Here were the key numbers in Netflix's Q1 earnings:

Q1 revenue: $4.52 billion, versus Wall Street estimates of $4.51 billion and Netflix forecasts of $4.49 billion.
Q1 earnings per share (GAAP): $0.76, versus Wall Street estimates of $0.58 and Netflix forecasts of $0.56.
Q1 total paid subscriber growth (paid net additions): 9.6 million, versus Wall Street estimates of 8.94 million and Netflix forecasts of 8.9 million.
- 1.74 million in the US, versus Wall Street estimates of 1.61 million and Netflix forecasts of 1.6 million.
- 7.86 million internationally, versus Wall Street estimates of 7.33 million and Netflix forecasts of 7.3 million.
Q2 total paid-subscriber-growth guidance (estimated paid net additions): 5 million, versus Wall Street estimates of 6.09 million.
- 300,000 in the US, versus Wall Street estimates of 617,000.
- 4.7 million internationally, versus Wall Street estimates of 5.47 million.