Netflix added more than twice as many subscribers as it had forecast in the first three months of the year, joining the ranks of large technology companies that are emerging as the biggest winners of the lockdown economy.
The video streaming service added 15.8m subscribers in the three months ending in March, blowing past its own 7m target for subscriber additions and Wall Street’s forecast for 7.4m. Netflix shares jumped more than 5 per cent in after-hours trading before falling back.
Netflix shares have soared to record highs since the coronavirus outbreak forced a global lockdown as investors piled into one of the few companies expected to benefit from the pandemic. While the benchmark S&P 500 index has lost 12 per cent this year, Netflix stock has climbed more than 30 per cent.
The California-based company warned that the boost in subscribers and viewership was temporary, and would be offset by a stronger dollar, which weighed on its revenue in the quarter. Revenues in the quarter climbed 28 per cent over the start of last year to $5.77bn, just above forecasts of $5.74bn.
“We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon,” the company said in a letter to shareholders.
$5.77bn Netflix’s revenues for the first three months of 2020
With production of original movies and television series shut down, some of Netflix’s spending was delayed, which resulted in a positive cash flow of $162m in the quarter. Netflix now expects to burn though $1bn or less this year, down from its previous forecast for a negative $2.5bn in free cash flow. Net income rose to $709m, from $344m a year ago.
Because of the lockdown begun in mid-March, Wall Street expectations had been high. During the quarter, Netflix debuted new shows such as Tiger King, a murder mystery docuseries which became a binging sensation, drawing 64m viewers, the company said on Tuesday.
During January and February user growth was as projected, but the March lockdown produced a surge in new customers. Most of these subscribers came from outside the US, where much of the country only went into isolation towards the end of the month.
During the quarter, Netflix signed up almost 7m subscribers in Europe, the Middle East and Africa, followed by 3.6m in Asia. The overseas totals weighed on revenues, since most of the new customers paid in currencies that weakened against the US dollar.
Netflix this year has faced an influx of competition in the video streaming market it pioneered, as Disney, Apple and Comcast unveiled their own services.
The challenge for Netflix and its peers is to keep people satiated with programming, even as new productions shut down. Netflix on Tuesday said its second-quarter programming slate should not be hit, apart from issues with dubbing in other languages, with Italian voice actors sheltered at home for weeks.
The company anticipates its growth to return to normal by the end of June, forecasting it would add 7.5m subscribers in the second quarter. But Netflix warned: “Given the uncertainty on home confinement timing, this is mostly guesswork.”