On April 19, Netflix Inc. (NFLX) declared its financial results for the first quarter of 2022. The earnings release raised some alarming questions about the streaming giant’s growth and performance. Investors were spooked enough by its first subscriber drop in a decade to not only cause NFLX but many other streaming stocks to take a hit.
NFLX stock tumbled down by a huge 25.73% in the after-hours session on Tuesday following the earnings release. Thus, the stock plunged down to a new low of $258.90 in the session against its previous 52-week low of $329.82.
NFLX’s Q1 Earnings Review
The streaming company’s latest earnings presented a very bleak picture with revenue and subscriber growth both below expectations. NFLX’s quarterly revenue fell below the expected $7.93 billion at $7.78 billion for Q1. The revenue grew by a mere 9.8% YOY.
Moreover, what raised many alarms and fears was the decline in the giant’s subscribers. The company lost 200,000 subscribers globally in Q1 2022 while it was expected to add 2.7 million. This is the first time in a decade that the company has dropped subscribers. Furthermore, the company deemed the suspension of services in Russia due to its invasion of Ukraine as a reason for the decline in subscribers. Increasing competition with many new streaming services coming out continuously amid rising inflation and Netflix password sharing were also among the reasons.
Additionally, what’s even worse is that the company expects to lose another 2 million subscribers in the current quarter with decreased growth in the near future.
The outbreak of the pandemic while confining people to their homes led to a new era of streaming services. Lately, streaming wars have been heating up immensely. Streaming platforms have been spending a lot of money for gaining market share in a highly increasing competitive environment. Video streamers like TikTok and others have garnered immense popularity while many new services are launched regularly in the market.
The coming of a variety of streaming services amid rising inflation and ongoing economic instability has displaced many known names in the industry with NFLX also taking a harsh hit.
NFLX’s Questionable Future?
As Covid led to a boost in NFLX revenue, the company’s judgment about its growth was clouded. Thus, now that the pandemic has calmed, NFLX was given a harsh reality check in form of declining subscribers amid increasing competition. While it still expects decreased growth in the near term, the company has outlined a detailed plan to grow revenue in the long term. But the market situation and increasing competition have investors worried about the giant’s future.