Netflix reported better-than-expected gains on Tuesday, and saw a smaller-than-expected exodus of viewers, although the platform struggles to maintain its meteoric pandemic growth.
Although Netflix recorded its second consecutive quarterly drop in subscriber growth and lost 1 million viewers in the second quarter of 2022, that figure was lower than the 2 million it had projected in its previous report. Shares rose 10% in out-of-hours operations.
Netflix’s total revenue for the first quarter of 2022 was $ 7.70 billion, without analysts ’expectations of $ 8.04 billion. In a letter to investors, Netflix said generating more revenue growth is a current goal.
“Our challenge and opportunity is to accelerate the growth of our revenue and members by continuing to improve our product, content and marketing as we have done for the past 25 years, and better monetize our large audience,” the letter said.
Shares of Netflix have fallen about 67% this year. The company cited additional headwinds for the slowdown, including password swapping, competition and a slow economy. He also said the strong dollar was affecting subscribers outside the US.
To make up for the drop, Netflix has for the first time released a cheaper version of its platform that includes advertising, a move that Jesse Cohen, a senior analyst at Investing.com, said could serve as a much-needed growth catalyst.
“We hope that advertisers looking for the opportunity to reach younger viewers who have abandoned traditional television will likely spend a larger portion of their marketing budget on advertising on Netflix in the future,” he said.
Tuesday’s report is the first since April, when the company’s value dropped 35% after Netflix revealed it had lost more than 200,000 subscribers in the first three months of the year. Experts say the company is not yet out of the woods as it seeks to stabilize its fall.
“Netflix remains the leader in video streaming, but unless it finds more franchises that have a wide resonance, it will ultimately struggle to stay ahead of competitors that are behind its crown,” said Ross Bene, an analyst at the market research firm Insider Intelligence.
The report did not address concerns about further layoffs, after the company cut 150 jobs the previous quarter. Other major technology companies, such as Spotify and Google’s parent company, Alphabet, have announced hiring slowdowns and layoffs in recent weeks.
Netflix and other streaming companies experienced explosive growth in the early days of the pandemic, when millions of people were stranded, but the company has struggled to maintain its trajectory. It added more than 36 million subscribers during the first year of the pandemic and its share increased 86% from late 2019 to 2021, while the S&P 500 rose 48%.
But the streaming market has filled up, with several platforms fighting for a finite number of viewers. Netflix is also competing with legacy media competitors who pour large amounts of funding into the original programming. Disney, owner of ESPN, Hulu and Disney Plus, spent $ 33 billion on content this year.
Netflix’s earnings report comes amid a broader fall in the tech industry, which accompanies fears of a market-wide recession as inflation continues and Silicon Valley struggles to maintain its pandemic momentum. Investors will be watching closely as Meta, Google, Twitter and Tesla have earnings calls over the coming weeks.
Reuters contributed to the reports