Netflix stock plunges due to underwhelming revenue projections and decision to eliminate membership metrics

Netflix (NFLX) stock took a hit on Friday, dropping as much as 8% after the streaming giant provided a second-quarter revenue forecast that fell short of expectations. The company announced that it would no longer report quarterly subscriber metrics, a move closely watched by Wall Street analysts.

In its guidance for the second quarter, Netflix projected revenue of $9.49 billion, slightly below consensus estimates of $9.51 billion. The company also stated that it would cease reporting quarterly membership numbers and average revenue per member starting next year.

Despite the revenue miss, Netflix reported first-quarter earnings that exceeded expectations, with over 9 million new subscribers added in the quarter. This strong subscriber growth helped drive revenue to $9.37 billion, surpassing Bloomberg consensus estimates of $9.27 billion.

The company’s stock had been on a positive trajectory in recent months, trading near the high end of its 52-week range. However, the lower-than-expected revenue forecast and the decision to stop reporting key metrics caused a sharp decline in the stock price.

Netflix’s profitability metrics also showed strength, with operating margins reaching 28.1% in the first quarter, up from 21% in the same period last year. The company expects operating margins to dip slightly in the second quarter but remain strong overall.

Overall, while Netflix’s subscriber growth remains robust, the market reaction to the revenue forecast and metric reporting changes highlights the importance of transparency and communication with investors in the highly competitive streaming industry.