NEW YORK: Netflix’s first quarter profit surged 140 per cent but the streaming service reported its worst growth rate of new subscribers in eight years.
After exponential growth during the Covid-19 pandemic delivered the strongest quarter in the company’s history at the end of March 2020, the world’s largest streaming platform said the uptick of new subscribers in the first three months of this year had slowed as a result of sluggish production of TV shows and movies. It also warned the second quarter will be difficult, report agencies.Netflix’s net income rose to $1.7 billion in the first quarter as revenue surged more than 24 per cent to $7.1bn on an annualised basis, topping analysts’ expectations of $5.7bn. But the company added almost 4 million subscribers in the period, missing its own forecast of 6 million and analysts’ estimates of more than 6.2 million. This was the weakest start to the year since 2013.
In its guidance for the second quarter, Netflix said it expects its paid users to increase by 1 million against Wall Street’s expectations for 4.4 million. It forecasts net profit to drop by more than 15 per cent to $1.4bn and revenue to marginally rise to over $7.3bn in the April-June period.
The company’s shares fell as much as 13 per cent on the weaker outlook.
“We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays,” Netflix said in its letter to shareholders.
However, the company anticipates a strong second half of the year with the return of new seasons of some of its biggest hits and a new movie line-up.
“As we have noted previously, the production delays from Covid-19 in 2020 will lead to a 2021 slate that is more heavily second half weighted with a large number of returning franchises,” it said. “In the short-term, there is some uncertainty from Covid-19 … in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment.”Netflix finished the first quarter with nearly 208 million paid memberships, up 14 per cent yearly, but below the company’s earlier forecast of 210 million.
“There is no doubt that this quarter was going to be the most painful for Netflix as consumers return to their normal behaviour … because of the coronavirus vaccine,” Naeem Aslam, chief market analyst at brokerage Avatrade, said in a note to clients.