Netflix (NFLX) earnings Q1 2022

Shares of Netflix cratered more than 24% on Tuesday after the company reported a loss of 200,000 subscribers during the first quarter. It’s the first time the streamer has reported a declining paid users in more than a decade.

The company also said it expects the decreases to continue, forecasting a global paid subscriber loss of 2 million for the second quarter.

“Our revenue growth has slowed considerably,” the company wrote in a letter to shareholders Tuesday. “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally,. However, our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.”

Netflix previously told shareholders it expected to add 2.5 million net subscribers during the first quarter. Analysts had predicted that number would be closer to 2.7 million. During the same period a year ago, Netflix added 3.98 million paid users.

Here are the key numbers from the first-quarter report:

• EPS: $3.53 vs $2.89, according to a Refinitiv survey of analysts.
• Revenue: $7.87 billion vs $7.93 billion, according to a Refinitiv survey of analysts.
• Global paid net subscriber additions: A loss of 200,000 compared with 2.73 million adds expected, according to StreetAccount estimates.

The company said that the suspension of its service in Russia and the winding-down of all Russian paid memberships resulted in a loss of 700,000 subscribers. Excluding that impact, the company said it would have seen 500,000 net additions during the most recent quarter.

Netflix also cited growing competition from traditional entertainment companies that have launched streaming services, as well as password sharing for the recent stall in paid subscriptions.

The company estimates that in addition to its 222 million paying households, that the service is being shared with more than 100 million additional households through account sharing.

Netflix said the pandemic “clouded the picture” of the company and lead it to believe that slowing growth in 2021 was due to subscribers returning to more normalized out-of-home activities.

In an effort to continue to gain share in the market, Netflix has increased its content spend, particularly on originals. To pay for it, it’s hiked prices of its service. The company said Tuesday that these price changes are helping to bolster revenue, but was partially responsible for a loss of 600,000 subscribers in the U.S. and Canada during the most recent quarter.

While the company is exploring other options for growth, like adding video games, analysts and investors are wondering what else Netflix can do to bolster revenue.

Correction: Netflix reported revenue of $7.87 billion for the first quarter of 2022.

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