Netflix posts lower-than-expected Q1 net new adds, guides lower for Q2

Netflix posted stronger-than-expected quarterly profits overnight but added fewer new subscribers than analysts on Wall Street had penciled-in, sending its shares plunging in after-hours trading in New York.

The US video streaming giant also guided towards fewer net adds in the next quarter, which some observer attributed to the fading boost from the pandemic.

For the three months ending on 31 March, the company reported revenues of $7.16bn (consensus: $7.14bn), up from $5.77bn in the year earlier period.

Earnings per share for the quarter meanwhile printed at $3.75 (consensus: $2.99), against $1.57 one year ago.

However, Netflix added only 3.98m net new subscribers over the three months ended in March (consensus: 6.29m).

In the first quarter of 2020 net new adds had rocketed by 15.77m as the Covid-19 pandemic broke across the world.

For the second quarter of 2021 meanwhile, Netflix was anticipating just 1.0m new adds, far less than the Street's median forecast of 4.4m.

"Expectations for user growth were always likely to be a hostage to fortune given that they were set at a rather lofty 6m, and with lockdowns set to be eased and the summer months usually a time when people want to go outdoors, there was always this risk that we might see a miss on these numbers," said CMC Markets UK chief market analyst, Michael Hewson.

"[...] Netflix remains number one in the streaming space, and while this could be considered a setback, its unlikely that this slowdown in subscriber growth will translate into a move away to its peers.

"The likes of Amazon Prime, Disney and Apple are likely to experience the exact same sort of subscriber slowdown as restrictions get eased further."

Looking ahead, Netflix guided towards second quarter EPS of $3.16 (consensus: $2.68).

Shares of Netflix fell 8.01% to $505.57 in overnight trading.