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Netflix beats Q1 earnings estimates but faces challenges in pursuit of growth

Netflix, the world’s leading streaming service, beat Wall Street earnings estimates for Q1 but offered a lighter-than-expected forecast, highlighting the challenges of a mature streaming market. The company is looking for new ways to make money, including a new ad-supported service and a crack down on unsanctioned password sharing. Revenue and earnings for Q1 came in roughly in line with average analyst estimates, with revenue of $8.162 billion and earnings per share of $2.88. However, the company added 1.75 million streaming subscribers, missing analyst estimates of 2.06 million additions.

Netflix plans to clamp down on password sharing, offering a “paid sharing” option in 12 countries. However, the company delayed a wider launch until Q2 to make improvements, delaying some financial benefits. Despite the delay, the company said it was on track to meet its full-year 2023 financial objectives. The clampdown on password sharing will begin in the United States during the current quarter.

Netflix serves as a bellwether for the streaming industry, in which growth has slowed as competition has intensified. Netflix added nearly 9 million subscribers in 2022, half as many as the 18 million gained in the prior year, with much of that growth coming from Asia. The gains in Asia and Latin America have impacted the average revenue per user, leading Netflix to introduce a lower-priced version of its service with ads in 12 countries in Q4. Analysts suggest the password-sharing crackdown could well fuel Netflix’s nascent advertising business, as it drives these “sharers” to the lower-priced version of the service.

Keywords: Netflix, streaming, earnings, subscribers, password sharing, advertising, competition, growth, Asia.

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