Netflix continues to see gains from its password sharing crackdown, with the US-based streaming provider’s revenue increasing by 15% year-on-year in the first quarter (Q1) of 2024.
Last year, Netflix discontinued password sharing in South Africa and additional markets, turning service borrower household accounts into fully-paying memberships.
In its quarterly results published yesterday, Netflix posted revenue of $9.4 billion in the quarter, attributing the increase to membership growth as well as pricing.
For the period under review, the company’s operating income totalled $2.6 billion, versus $1.7 billion in Q1 of 2023. Netflix notes this is a 54% increasecompared to the same period last year.
Furthermore, it was above forecasts, primarily due to higher than anticipated revenue and content spend. The operating margin of 28% grew seven percentage points year-on-year, versus 21% in the previous quarter.
“Our two priorities in ads are to scale our member base and build our capabilities for advertisers. We made progress on both fronts in Q1. Our ads membership grew 65% quarter-on-quarter, after rising nearly 70% sequentially in each of Q3 23 and Q4 23.”
Netflix’s competitors include Disney+, Amazon Prime Video, Apple TV, Hulu and HBO Max.
According to the streamer, nearly 270 million households across 190 countries now subscribe to Netflix. “With more than two people per household on average, we have an audience of over half a billion people.”
Looking ahead, Netflix says its primary financial metrics are revenue for growth and operating margin for profitability.
“Our goals are to sustain healthy revenue growth, expand our operating margin and grow free cash flow. For Q2 24, we forecast revenue growth of 16%. This equates to 21% growth on a foreign exchange (F/X) neutral basis.
“We expect paid net additions to be lower in Q2 24, versus Q1 24, due to typical seasonality.
“For the full year 2024, we now expect FY24 operating margin of 25%, based on F/X rates as of 1 January 2024, up from our prior forecast of 24%.
“As noted in the past, while we've launched a F/X risk management programme to reduce near-term volatility, we don’t intend to be fully hedged, which is why we guide and manage to a F/X neutral operating margin target. Our goal is to increase our operating margin each year, though the rate of expansion may vary year to year.”
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