Netflix stock (NASDAQ:NFLX) tanked after hours Tuesday, sliding 20.5%, as it fell short of even modest subscriber growth expectations, posted a loss in subscriptions and forecasted even more rough times ahead.
Netflix (NFLX) said it lost 200,000 subscribers on a net basis, well short of its scaled-back guidance for additions of 2.5 million subscribers. It was Netflix's (NFLX) first subscriber loss in a decade, and left the company down to 221.64 million global subscribers compared to 221.84 million at the end of 2021. And Netflix (NFLX) is also forecasting a drop of 2 million net subscribers for the second quarter of this year.
That comes though the company beat profit expectations with earnings of $3.53 a share, on revenue that grew 10% from a year ago, to $7.87 billion. For its second quarter, Netflix (NFLX) said it expects to report sales of $8.05 billion, while analysts had forecast $8.22 billion in revenue for the quarter ending in June.
It's blunt in its message to investors: "Our revenue growth has slowed considerably ... Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds."
Netflix (NFLX) added that its overall business picture was obscured by the big pandemic boost to streaming.
The company adds it will hold operating margin around 20% as it looks to reaccelerate revenue growth through "improvements to our service and more effective monetization of multi-household sharing."
Operating income ticked up only slightly, to $1.972 billion from a $1.96 billion a year ago, and operating margins fell to 25.1% from 27.4% in the first quarter of 2022.
Free cash flow - negative for each of the past three quarters - was positive at $802 million, amid a big boost to net cash from operations, to $923 million.
Netflix's earnings interview - where executives answer questions about the quarter, and moderated this time by J.P. Morgan's Doug Anmuth - is set for release at 6 p.m. ET.