Netflix's decline in subscriber growth reported in first quarter earnings sent its shares down sharply, showing that finding new users remains a never-ending story for the company.
Between January and March, approximately 3.98 million people signed up for Netflix, well short of the expected 6 million. The company stated that a lack of new shows may have led to the drop, but that it expects this to recover as sequels to hit shows are launched.
Netflix shares fell 11% in after-hours trading to $489.28, wiping off $25 billion from the company's market capitalization.
Netflix also predicted a sluggish second quarter, forecasting only 1 million new subscribers and a "roughly flat" customer base in North America, its largest market.
"We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year due to Covid-19 production delays," Netflix told shareholders.
As its user base grew at the height of the pandemic, Netflix increased revenue quickly enough to cover both operating costs and content spending, marking a watershed moment in the company's history. It announced in January that it would no longer need to incur additional debt to cover the costs of making television shows and films.
Revenues in the March quarter were up 24% from the same period last year to $7.2 billion, just above analyst expectations of $7.1 billion. Net income increased to $1.7 billion from $700 million a year ago, which Netflix attributed in part to pandemic-related production delays that kept costs down.
Netflix, however, is facing increasing competition from new streaming platforms entering the industry. Disney+, a much newer streaming service, currently has 100 million subscribers, compared with Netflix's 207.6 million.
Netflix attempted to allay these fears on Tuesday, promising that growth would pick up in the second half of the year with the return of hit shows like "The Witcher" and "Sex Education."
The company plans to spend $17 billion on content this year, with production underway in the majority of the world. It told shareholders that it did not think competition was a "material factor" in the first-quarter subscriber figures.
