Netflix shares sink as company announces halt in reporting subscriber tally, weak outlook

Shares of Netflix took a sharp tumble of about 5 per cent after the market closed, spurred by the streaming video pioneer’s decision to cease disclosing subscriber numbers and prioritise viewer engagement metrics.  

That was despite Netflix’s crackdown on password sharing, with the streaming service managing to exceed Wall Street’s earnings forecasts. 

The company reported impressive growth in its subscriber base, adding 9.3 million new customers, nearly double the consensus estimate, bringing its global total to 269.6 million by the end of March. 

However, the decision to halt the disclosure of subscriber numbers from next year marks a notable shift and removes a crucial benchmark for investors.  

“Netflix reported another quarter of incredible subscriber additions and revenue and profit growth. However, full-year sales guidance portends a deceleration in the second half, and we suspect the firm’s decision to stop regularly reporting subscriber numbers in 2025 supports our belief that yearly subscriber additions will reset at a rate significantly lower level than what Netflix has experienced over the past six quarters,” said Matthew Dolgin, Senior Equity Analyst at Morningstar. 

“With the stock selling off after the report, we see Netflix as a victim of its own success. Its business continues to show incredible strength, but maintaining the recent level of success is unrealistic in our view. We’re raising our fair value estimate to $440 from $425 on the back of the strong quarter, but still see the stock as a bit expensive.” 

Despite this change, Netflix reported strong financial performance for the January to March period, with earnings per share coming in at $5.28, exceeding analyst expectations of $4.52. Revenue also saw a healthy increase of 14.8 per cent to nearly $9.4 billion during this period, driven by the release of popular titles such as the sci-fi drama series “3 Body Problem” and crime thriller “Griselda.” – Reuters reported. 

Operating income experienced a significant year-over-year increase of 54 per cent, totalling $2.6 billion. Looking ahead, Netflix projects revenue of $9.49 billion for the current quarter but anticipates overall revenue growth of 13-15 per cent for the full year.  

Despite the drop in share prices following the announcement, Netflix remains a dominant player in the streaming industry, continuing to attract a large and loyal subscriber base.