Netflix reports average Q1 earnings despite upswing in subscriptions


Netflix yesterday reported its 2020 Q1 earnings after the bell. In this quarter, Netflix has reported a big jump in new paid subscribers from less than 10 million in Q4 2019 to 15.8  million in Q1 2020.

The jump is attributed to the impact of the Coronavirus pandemic which has had a push to its growth. Since social distancing and lockdown implemented in most countries around the world, people have shifted to Netflix and other streaming service providers for entertainment.

“Like other home entertainment services, we’re seeing temporarily higher viewing and
increased membership growth. In our case, this is offset by a sharply stronger US dollar, depressing our international revenue, resulting in revenue-as-forecast. We expect to view to decline and membership growth to decelerate as home confinement ends, which we hope is soon.” said Netflix CEO Reed Hastings

Netflix reported $1.57 Earnings Per Share (EPS) $5.77 billion in revenue and 15.77 million global paid net subscriber additions. Prior to the crisis, Netflix in Q4 of 2019  posted $5.47 billion of revenue, $ 53 cents in EPS and 8.33 million subscribers.  The earnings are relatively average despite the subscriber uptick.

In a letter to its shareholders, Netflix said it expects 7.5 million global paid subscriber additions in Q2. The company, however, warned that the numbers are “mostly guesswork”. Since it can’t know when stay-at-home orders around the world will be lifted.

However, in Q3, the company expects lower net subscriber additions as more economies open. Also, its third quarter last year included new seasons of popular series. Including  “Stranger Things” and “Money Heist which managed a high viewership.” and the rest. which seems impossible to have new shoots following the ongoing pandemic.

The massive postponement of content production might lead to a drop in revenues.

“When it comes to production, almost all filming has now been stopped globally. With the exception of a few countries like Korea and Iceland. This has been devastating for millions of workers in the TV and film industry – electricians. Including hair and make-up artists, carpenters, and drivers who are often paid hourly wages and work project-to-project.”

The letter further noted that in March, Netflix created a $100 million fund to help with hardship in the industry, starting with the hardest-hit workers in their productions, where Netflix has the greatest responsibility.

“At Netflix, we’re acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home. And which we can operate remotely with minimal disruption in the short to medium term.