Netflix added another 9.3 million subscribers earlier this year and its profits soared, helped by a still-emerging advertising expansion, but what caught investors off guard is that the change will make tracking the video streaming service’s future growth complicated. becomes more difficult.

Results released Thursday showed Netflix is ​​still building on last year’s momentum, when it returned to growth after a post-pandemic lull following a crackdown on free viewers who relied on shared passwords and the introduction of lower-priced options that include ads.

This strategy allowed Netflix to add 30 million subscribers last year, the second-largest annual gain in the service’s history.

Netflix’s growth between January and March was more than four times the 1.8 million subscribers the video streaming service added during the same period last year and nearly triple analysts’ forecasts. The Los Gatos, California-based company had nearly 270 million users worldwide as of the end of March, including about 83 million in the United States and Canada, its largest markets.

Investors increasingly view Netflix as the clear winner in a fierce streaming battle that includes Apple, Amazon, Walt Disney Co. and Warner Bros. Discovery — a conclusion that has led to Shares have more than doubled since the end of 2022.

But in a surprise to investors, Netflix revealed in a shareholder letter that starting next year it will stop providing quarterly updates on its subscriber totals, a move that will make it more difficult to track the growth or contraction of the video streaming service. . The company has regularly reported quarterly user totals since it went public 22 years ago.

Despite the strong financial performance, Netflix shares fell more than 5% in after-hours trading.

In a video conference with analysts, Netflix co-CEO Greg Peters said management believes the company’s financial growth deserves more attention than quarterly fluctuations in subscriber numbers.

“We think this is a better approach that reflects the evolution of the business,” Peters said.

The company still intends to update its subscriber totals annually. Business executive Raj Venkatesan said the plan shows Netflix is ​​trying to get investors to focus on longer-term trends rather than three-month increments that could be affected by short-term factors such as programming changes and household budget pressures that could lead to temporary cancellations. . Professor at the University of Virginia, studying the video streaming market.

eMarketer analyst Ross Benes said that now that it’s been more than a year since Netflix cracked down on password sharing, management may also realize that the company has reaped most of the user gains from these measures and realize that maintaining this Building momentum will become more difficult.

“They quit when they were ahead and stopped reporting quarterly subscriber numbers,” Benes said.

Netflix’s subscriber numbers are growing again, along with a greater focus on improving profits and revenue, an emphasis that has led management to be smarter about its spending on original programming and to regularly raise subscription prices.

The formula helped Netflix earn $2.33 billion, or $5.28 a share, in its most recent quarter, a 79% increase from the same period last year. Revenue increased 15% from the same period last year to $9.37 billion. Analysts polled by FactSet expected earnings of $4.52 per share and revenue of $9.27 billion.

Ad sales still play a small role in Netflix’s finances, and BMO Capital Markets analyst Brian Pitz expects the company to bring in about $1.5 billion this year from ads played on its service , and is expected to maintain steady growth in the next few years. Pitts said the low-cost advertising option has had a significant impact on attracting and retaining subscribers, with an estimated 41 million customers paying for the business format.

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