With several new competitors set to debut later this year, Netflix continued to tighten its stranglehold on the streaming world on Tuesday, with the company reporting it added a record 9.6 million subscribers during the first quarter.
The nearly 10 million new customers put the company on the verge of hitting 150 million paid subscribers overall while beating analyst estimates of 8.9 million new customers at the same time. Most of Netflix’s new viewers came from outside the U.S., with 7.9 million international subscribers signing up.
Netflix reported $4.5 billion in revenue, matching analyst estimates, and posted earnings of 76 cents per share, easily running past Wall Street projections of 58 cents per share.
Despite the record-setting quarter, Netflix’s stock still dropped 6% in early after-hours trading, after the company forecasted that it would have 5 million new subscribers for Q2, falling short of analyst projections. It would also mark an 8% decrease year-over-year in new subscribers. At the same time, Netflix projected Q2 earnings of 55 cents per share; analysts had the company pegged closer to $1 EPS. Netflix shares started to recover from its initial swoon about an hour after its earnings were released, with shares down about 1.4 percent to $354 per share.
This was the first quarter since Netflix hiked prices on U.S. subscribers in January, with its most expensive package now running $15.99 per month.
In its letter to shareholders, Netflix said it’s “working through” its price hikes. Gross subscriber additions were “unaffected,” the company said, although it did note “some modest short-term churn.”
Tuesday’s Q1 report also comes less than a week after Disney unveiled its Disney+ streaming service — something many analysts see as the biggest threat to Netflix’s streaming supremacy. Running $6.99 per moth, Disney+ will launch in November with several original shows, including a “Star Wars”-related series spearheaded by Jon Favreau, while also being the exclusive streaming home to major franchises like “Frozen” and “Toy Story.” Last month, Apple shed more light on its upcoming programming as well, with CEO Tim Cook joined on stage by a who’s who from the entertainment world, including Oprah Winfrey and Jennifer Aniston.
As The Information pointed out, Netflix has been working to make its service less “vulnerable” to partners-turned-competitors pulling content, investing heavily in its slate of original shows. Still, the value of Netflix’s licensed content more than doubles the value of its originals portfolio.
Netflix didn’t sound too concerned with its new competitors on Tuesday, however.
“We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings,” the company said in its shareholder letter. “We believe we’ll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing (similar to how US cable networks collectively grew for years as viewing shifted from broadcast networks during the 1980s and 1990s).”
As usual, it had been a busy few months for Netflix, with the service releasing a new season of “Queer Eye,” renewing British comedy “Sex Education” for a second season, and “Roma” earning the company’s first-ever Best Picture nomination.
The company highlighted the performance of multiple shows and movies in its shareholder letter. Comic series “The Umbrella Academy” pulled in 45 million viewers during its first month on the service, and its documentary on the disastrous Fyre Festival attracted 20 million viewers during its first month.
To keep the shows coming, Netflix is continuing to spend big on content, with about $15 billion earmarked for 2019. Netflix finished Q1 with $10.3 billion in long-term debt and $3.1 billion in cash.
Netflix will hold its standard recorded call to discuss its earnings at 6 p.m. ET on its YouTube investor relations page.
Jennifer Maas contributed to this report.