Netflix surpasses Wall Street expectations amid plans for further crackdown on password sharing

Streaming giant Netflix has surpassed Wall Street expectations for Q1 2023. However, the company shared a lighter-than-expected forecast today, which shows the challenges that the company is facing as it pursues growth.

Netflix surpasses Wall Street expectations

The streaming company also said it was working on a larger plan to crack down on unsanctioned password sharing in the second quarter. The company also plans to make some improvements, which might delay some financial benefits. The company also aims to bolster its revenues through a new ad-support service.

The revenues and the earnings reported by Netflix in Q1 nearly met the average estimates. The company reported $8.162 billion in revenues, with the earnings per share being $2.88. The co-chief executive, Ted Sarandos, said the company was growing and becoming more profitable.

Netflix shares are down by 3.26% today. The company mainly serves the streaming industry, which has witnessed slowing demand amid increased competition. During the first three months of 2023, Netflix had 1.75 million new streaming subscribers. The number failed to hit analyst estimates of 2.06 million new subscribers.

The Q1 results posted by Netflix have been termed as fixed. While the company does not rely heavily on subscriber growth, the metric is still important for stakeholders. One of the efforts made by the company to crack down on password sharing is the launch of the “paid sharing” option available to subscribers in 12 countries. However, the company is delaying the expansion of this service.

The company also said it was “on track to meet our full year 2023 financial objectives.” Netflix added that the crackdown on password sharing would commence in the US in the current quarter. The company has also predicted that its revenues and diluted EPS for the second quarter will reach $8.242 billion and $2.86, respectively. The numbers are below Wall Street estimates.

Another new feature that Netflix is also launching is live streaming. However, this feature is off to a rough start as a “Love is Blind” reunion special that was supposed to be streamed live was unavailable. The company attributed the issue to a bug that has since been fixed.

Recovering from the losses of last year

Netflix is making changes and launching new features to recover from the losses seen over the past year. One year ago, the company lost 200,000 subscribers, marking the first drop in subscriber numbers in over ten years. The numbers at the time sent the company’s stock plunging.

In 2022, Netflix gained 9 million new subscribers, notably less than the 18 million subscribers gained during the previous year. The majority of new subscribers during the year came from Asia. The gains made by the company in Asia and Latin America have affected the average revenue per user.

The recent crackdown on password-sharing could also support the advertising business that Netflix is pursuing. In the last quarter of 2022, the company rolled out a lower-priced version of its service with ads. The service is currently available in 12 countries.