Netflix, in a rather surprising move, announced on Thursday that it will no longer share its subscriber numbers quarterly, signalling a shift in the streaming giant's strategy amidst slowing growth. The company's shares dropped by 4.2 per cent in after-hours trading to $585.41 following the announcement and a revenue forecast that fell short of expectations.


Despite a robust addition of 9.3 million subscribers in the first quarter, nearly double the number anticipated by analysts surveyed by LSEG, Netflix's latest strategy update overshadowed these gains. This increase has pushed Netflix’s global subscriber count to 269.6 million as of the end of March. The company has attributed this surge largely to its new ad-supported subscription model.


Only At Significant Milestones


Netflix’s leadership, including co-Chief Executive Greg Peters, emphasised a strategic pivot toward emphasising revenue and operating margins over subscriber growth. Starting in the first quarter of 2025, Netflix will report subscriber figures only at significant milestones rather than quarterly. Peters explained that this shift aims to align more closely with the core metrics significant to the company’s business.


The decision to cease regular reporting of subscriber numbers has stirred concerns among analysts and investors, complicating future business modelling and potentially obscuring the trajectory of customer growth. Analysts are particularly concerned about the long-term drivers of new subscriptions once the benefits from Netflix's crackdown on password sharing taper off. Magalie Grossheim from M Science reflected on the uncertainty about what future catalysts might drive subscriber additions.


Meta, X Also Stopped Reporting


This move by Netflix follows a trend among tech giants like Meta and X, the social platform formerly known as Twitter, which have also stopped reporting certain user metrics as growth slowed.


Shares of Netflix have risen by 89 per cent over the past year, significantly outperforming rivals like Walt Disney, which continues to report losses in its streaming operations. Netflix plans to stimulate further growth by enhancing its content variety and scaling its advertising efforts. The company is gearing up for its second annual presentation to advertisers in New York, where co-CEO Ted Sarandos expressed enthusiasm about showcasing new and returning series, including Bridgerton and Sweet Tooth.


In addition to content improvements, Netflix has seen a substantial uptake in its ad-supported subscription options introduced in November 2022, which now represent 40 per cent of new sign-ups in available markets. This lower-cost model has helped transition users from shared passwords to paid subscriptions.


Robust First Quarter


For the first quarter, Netflix reported earnings per share of $5.28, surpassing analyst predictions of $4.52. Revenue for the period grew by 14.8 per cent to nearly $9.4 billion, driven by new shows like 3 Body Problem and Griselda. The company’s operating income saw a 54 per cent increase year-over-year, totalling $2.6 billion.


Looking forward, Netflix has projected slightly lower revenue expectations for the current quarter at $9.49 billion compared to analyst forecasts of $9.537 billion. The company continues to expand its programming scope, including a new $5 billion deal to stream WWE Raw starting in January 2025, highlighting its ongoing efforts to cater to a diverse and growing global audience. Despite rumours to the contrary, Sarandos clarified that Netflix is not reducing its film production but is focusing on enhancing the quality of its cinematic output.