Netflix Shares Fall On Lower Q1 Subscription Growth: What Investors Should Know

Netflix Inc NFLX reported first-quarter fiscal earnings after Tuesday's close and the stock took a tumble.

What Happened: Netflix's revenue of $7.16 billion in the first quarter beat consensus estimates of $7.13 billion, a year-over-year increase of 24%.

The streaming giant reported quarterly earnings of $3.75 per share, which beat the analyst consensus estimate of $2.96 by 26%.

The company reported 208 million paid subscribers at the end of the first quarter, a 14% year-over-year increase. The figure came in below the company’s guidance of 210 million. The company added 4 million paid subscribers in the first quarter, below the 6 million originally forecasted and well below the 16 million the company added in the first quarter of the last fiscal year.

Retention was reported as in-line for the first quarter. The company blamed a pull forward from last year due to the COVID-19 pandemic and a lighter content slate as reasons for the miss on paid subscriber growth.

The company said it's close to being sustainably free cash flow positive and will no longer need to raise external financing for funding of day-to-day operations.

Related Link: Netflix Has Record Breaking December, Holiday Week Thanks To Bridgerton And We Can Be Heroes

What’s Next: The upcoming content slate was a big focus in Netflix’s shareholder letter as the company anticipates it to help with subscription numbers in the latter part of the year.

“We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup,” the company said.

The company is guiding for second-quarter revenue to hit $7.3 billion versus a Street consensus of $7.4 billion. The company is guiding for second-quarter earnings per share of $3.16.

“We anticipate paid membership growth will re-accelerate in the second half of 2021 as we ramp into a very strong back half slate.”

NFLX Price Action: Shares of Netflix are down 10% to $492.78 in after-hours trading Tuesday.