Netflix Reports Slowing Growth to Send Its Shares Sharply Lower

By Adriaan Brits Wednesday, April 21, 2021

Netflix, one of the largest streaming services globally, reported a slower-than-expected growth rate for its business as the ongoing COVID-19 pandemic facilitated production delays.

Netflix logo on iPad.

Missing Subscription Targets, Weak Guidance

Netflix reported earnings per share (EPS) of $3.75 to easily beat the $2.97 per share expected from the surveyed market analysts, as per the data provided by Refinitiv. Business revenue in Q1 came in at $7.16 billion, a number that is slightly better compared to the $7.13 billion Wall Street was expecting. The reported business revenue figures mark a 24% year-to-year (YOY) increase.

However, Netflix reported a huge miss on a key metric for its business in Q1 — the number of new subscribers. The company said it added 3.98 million global paid net subscribers, which is much lower compared to its previous target of 6 million, and the 6.2 million the market analysts were expecting.

Netflix said it finished Q1 with 208 million paid memberships, representing a rise of 14% YOY, but again below the previous guidance of 210 million paid memberships. The streaming business that the 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.”

“We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup. In the short-term, there is some uncertainty from Covid-19; in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment,” the streaming company said in the statement.

The streaming business adds that the production delays amid the ongoing COVID-19 pandemic also yielded lower spending on new content. In this context, content amortization only grew 9.5% YOY, compared to 17% in the year-ago period. Lower content spending yielded higher operating margin for the company, which now stands at a record high of 27% in Q1.

“As we discussed in past letters, these dynamics are also contributing to a lighter content slate in the first half of 2021, and hence, we believe slower membership growth,” the company adds.

Average revenue per membership (ARPM) soared 6% YOY while operating income more than doubled to $2 billion, compared to $958 a year ago. Still, Netflix stock slipped 11% in extended trading on Tuesday before recovering a portion of losses to trade at 8.1% in the red before today’s open.

For the ongoing second quarter, Netflix projects to add 1 million new subscribers, which represents only 10% of the 10 million additions from a year-ago period. The company says that it is unlikely that stronger competition from Disney, HBO, Amazon Prime, and others impacted weak net additions.

“We don’t believe competitive intensity materially changed in the quarter or was a material factor in the variance as the over-forecast was across all of our regions,” the statement adds.

The streaming company forecasts to ramp up content production in the second half of the year as the vaccination activity in the US, as well as globally, picks up.


Although Netflix reported stronger-than-expected Q1 results for profit and business revenue, the streaming company posted a big miss on the new additions front and provided weak Q2 guidance as the COVID-19 outbreak continues to hamper content production.

About the Author

Headshot for author Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

Related Articles