Netflix, Inc. (NASDAQ: NFLX) reported its first quarter financial results after the market close on Tuesday. The streaming giant surpassed estimates across its financials, however, Netflix provided a lighter guidance, which caused shares to tumble by 1% on Wednesday morning.
For the first quarter, Netflix reported earnings of USD 76 cents per share on revenue of USD 4.52 Billion. Refinitiv analysts expected earnings of USD 57 cents per share on revenue of USD 4.50 Billion.
Netflix saw its revenue increase by 22% year-over-year, driven by a healthy growth in its international and domestic users. Domestic paid subscribers additions was 1.74 million in the quarter, beating expectations of 1.61 million. International paid subscriber additions totaled 7.86 million, also surpassing FactSet’s estimates of 7.31 million.
At the end of the quarter, Netflix had a total of 148.86 million paid subscribers, increasing from 118.90 million a year prior. The Company had 60.22 million domestic paying subscribers and 88.63 million international paying subscribers.
Netflix also announced that its Chief Marketing Officer Kelly Bennett will retire this year. Chief Content Officer Ted Sarandos will operate both content and marketing for the meantime while Netflix searches for a new Chief Marketing Officer.
Netflix has been facing pressure recently due to the rising competition within the marketspace. Previously, Netflix dominated the media streaming sector, but now more tech giants are beginning to expand into the industry.
Apple (NASDAQ: AAPL) announced its streaming service last month. Apple TV+ will provide users with content from various channels such as HBO, SHOWTIME, and Starz. Amazon (NASDAQ: AMZN) also offers a streaming service for users with Prime subscriptions.
However, Netflix is expected to witness a larger competition from Walt Disney (NYSE: DIS). Disney unveiled its pricing plan for its new Disney+ streaming platform. Disney announced earlier this month that the service will cost USD 6.99 per month and is expected to launch in November this year. The platform will include content from Disney, Pixar, Star Wars, Marvel Studios, and National Geographic, as well as “The Simpsons” and 20th Century Fox Titles “The Sound of Music,” “The Princess Bride,” and “Malcolm in the Middle”, according to Disney’s press release.
Despite Netflix’s better-than-expected quarter, the Company provided a lighter guidance for the second quarter. Netflix expects earnings of USD 55 cents per share compared to Refinitiv estimates of USD 99 cents per share.
“We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings,” Netflix wrote, “We believe there is vast demand for watching great TV and movies and Netflix only satisfies a small portion of that demand.”
Netflix Chief Executive Officer Reed Hastings said he doesn’t expect loss of third party content and is more focused on building up Netflix’s own original content.
“We’ve expected this decline of second window content, been ready for it, anticipating it,” Hastings said. “In fact we’re eager to be able to have more and more of our money to be able to do spectacular new titles.”