Netflix Stock Plunges 20% Following Disappointing Earnings Report

Topline

Netflix shares dropped 20% in after-hours trading Thursday following the release of its fourth-quarter earnings report, which exceeded analysts’ expectations on some counts but continued a trend of declining subscriber growth.

Key Facts

Key Background

The company benefited from the increase in the number of people staying home during the early months of the Covid-19 pandemic, but subscriber growth has slowed recently despite its development of record-breaking original content. Though two-thirds of Netflix’s subscribers watched Squid Game during the company’s third quarter, it only gained 4.4 million net subscribers in that span, and only 70,000 of them came from the U.S. and Canada. Last week, the company increased its subscription fees in those countries.

What To Watch For

Netflix projected a $7.9 billion increase in revenue for the first quarter of 2022, when the increase in subscription fees will be partially reflected, though existing users were given 30 days before they see an increase on their monthly bill. It expects 2.5 million new subscribers in the upcoming quarter — 1.48 million fewer than it earned in the same quarter a year prior. 

Tangent

Netflix pointed out its strength on Google’s list of the most-searched terms of 2021. The streaming service owned six of the 10 most-searched shows, with Squid Game and Bridgerton holding the top two slots, as well as two of the 10 most-searched films in Red Notice and Army of the Dead.