Netflix NFLX released its first-quarter results on April 21 after the market closed. The streaming giant recorded earnings and revenue that grew year-over-year as stay-at-home orders led to stunning subscriber growth.
Key metrics
The company posted diluted earnings of $1.57 per share, which reflected a gain of 117.11% from the same quarter last year. Revenue of $5.77 billion climbed 27.65% on a year-over-year basis. Wall Street had predicted earnings of $1.65 per share on $5.76 billion in revenue.
In a letter to shareholders, the company commented on how Covid-19 has affected its earnings:
“There are three primary effects on our financial performance from the crisis. First, our membership growth has temporarily accelerated due to home confinement. Second, our international revenue will be less than previously forecast due to the dollar rising sharply. Third, due to the production shutdown, some cash spending on content will be delayed, improving our free cash flow, and some title releases will be delayed, typically by a quarter.”
On the global front, the company added 15.77 million paid subscribers as more original shows and movies boosted growth. This exceeded the company’s previous prediction of 7 million. Currently, the company has 182 million subscribers globally.
The production shutdown
Netflix has shut down its production for the time being. However, the company says it has enough original content that was either completed or was in the post-production stage prior to the lockdown. The TV shows that are slated to be launched in May, June and July have already been completed. The company will therefore continue to release shows and sustain for the next few months.
Road ahead
Netflix expects to add 7.5 million paid customers in the second quarter. However, the company termed this estimate a “guesswork,” since it is uncertain as to when the stay-at-home order would be lifted.
The net subscriber additions are projected to go down in the third quarter, as home confinement is expected to end by then.
Disclosure: I do not hold any positions in the stocks mentioned.
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