Netflix Q1 earnings to be announced: what can we expect?

With Netflix set to report first-quarter earnings on Tuesday after the market closes, analysts and investors are eagerly waiting for what the numbers will reveal. What’s the talk on Wall Street?

Updates are timely, as Netflix has been busy with new initiatives lately. The streaming giant has recently launched an ad-supported tier, and the company is expanding its controversial – and quite annoying – crackdown on password sharing.

Besides, Netflix has previously said subscriber growth numbers won’t be important anymore, with the firm reportedly focusing on revenue as its primary metric going forward.

This is obviously a sign that Netflix sees its years of big growth as being over. Unsurprisingly, commentators will direct their attention to statistics surrounding the new monetization projects.

"We're still very early in both [advertising video on demand] and paid sharing, but any commentary on conversion, churn and/or adoption of the new offerings is more important to our thesis than Q1 results," Jefferies, an investment bank, wrote in a client note earlier this month cited by Yahoo!

Bloomberg estimates Netflix will report a revenue of $8.18 billion. This would mark year-over-year growth of around 4%, although it would be down from a growth rate of close to 10% in the same quarter last year.

The platform is also slated to add 2.3 million net subscribers. However, additional revenue related to the ad tier and paid sharing will probably have to wait.

Netflix’s initial target was attracting 40 million ad-based subscribers by the end of 2023. But this looks increasingly unrealistic – the landscape is ultra-competitive, and the streaming market is slowing down in general as customers try to save money.

The $6.99 ad-based plan – which is $3 cheaper than the basic plan in the US – launched in mid-quarter in November 2022, so its impact wasn’t really visible in the company’s earnings last quarter.

According to Insider Intelligence, a firm researching digital transformation, Netflix’s estimated ad revenue is expected to reach just $770 million by the end of the year, while Bloomberg has said that by February the ad tier only had a million active subscribers in the US.

What Netflix calls its crackdown on account sharing has not been announced in the US, the company’s main market. When the scheme is launched in America, migration to the ad tier might increase.

It will also be interesting to see whether Netflix’s market share will continue shrinking. Antenna, a research firm, recently showed Netflix’s share of the streaming pie had shrunk from 30% in the final quarter of 2021 to 25% at the end of last year.