Exuding confidence amid a volatile economic climate, Netflix leadership unveiled solid Q1 results that were on par with or beat Wall Street estim
Exuding confidence amid a volatile economic climate, Netflix leadership unveiled solid Q1 results that were on par with or beat Wall Street estimates.
Leadership also said that co-founder and former CEO Reed Hastings was segueing from his executive chairman role to chairman of the board and non-executive director.
Thursday marked the streamer’s first quarterly earnings without an update on the subscriber count. In Q4 the company reported 18.91m paid global adds to 301.6m. Thursday’s letter to shareholders said 700m people watched worldwide, over two-thirds of whom live outside the United States.
Widely regarded as the winner in the so-called streaming wars, Netflix’s focus these days is on the key financial metrics or revenue and profit.
Revenue for the period reached $10.5bn and 12% year-on-year growth, driven by membership growth and this year’s price hikes – more are expected around the world this year – and on par with consensus estimates according to LSEG Data & Analytics. The Q2 revenue forecast is $11m.
Operating income of $3.3bn climbed 27% on the year-ago period, while operating margin of 32% compared to 28% year ago. Diluted earnings per share of $6.61 grew 25% year-on-year and beat estimates of $5.66.
In its letter to shareholders the company forecast 2025 revenue of $43.5bn-$44.5bn based on “healthy member growth, higher subscription pricing and a rough doubling of our ad revenue, partially offset by F/X net of hedging”, and a 29% operating margin.
Analysts see Netflix as a sheltered haven stock amid economic volatility, believing it is one of the last items consumers will cut from their budgets. Asked about the impact of tariffs, Co-CEO Ted Sarandos said the streamer pays levies all over the world and was not changing its forecast.
“While the US represents our largest spend for content, employees, infrastructure, we produce in 50 countries around the world and we’re a net contributor to many of those economies and cultures,” said Sarandos. He referenced Netflix’s commitment to the UK, and the $1bn and $2.5bn production pledges to Mexico and South Korea, respectively. “We’re additive to the local economies and local cultures where we’re working, so perhaps a little bit less exposed.”
Co-CEO Greg Peters told analysts that the business plan was stable during a period of macroeconomic uncertainty, adding: “We take comfort that entertainment historically has been pretty resilient in tougher economic times.”
Asked about his confidence as an advertising seller for the first time heading into a possible recession in the United States, Peters noted no “softness” in its direct interactions with buyers. “The fact that we’re relatively small in ads as a revenue contributor… that smallness probably provides insulation to market shifts.”
The company rolled out its in-house ad tech platform on April 1 and the goal is to launch the Netflix Ads Suite in remaining ads markets.
As senior members of the original community like James Cameron are starting to embrace the possibilities of AI to reduce production costs while taking care to preserve jobs, Sarandos said Netflix saw an opportunity to make film and television “10% better”.
He said the company was using AI tools for set references, pre-visualisation, shot planning, and VFX sequence preparation, The executive cited the example of Rodrigo Prieto, who used AI tools to deliver de-ageing technology on his feature directorial debut Pedro Paramo “for a fraction of what it cost” five years ago on Martin Scorsese’s The Irishman, on which he served as cinematographer.
On the subject of film and television, Q1 saw debuts from Netflix’s third most popular English-language series ever Adolescence from the UK starring Stephen Graham (124m views); sixth most popular English-language film Back In Action starring Cameron Diaz and Jamie Foxx (146m views); sixth most popular non-English language film, Ad Vitam from France (63m views); and tenth most popular non-English language film Counterattack from Mexico (59m views) from Mexico.
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