Netflix Stock Tumbles On Softer Q1 Subscriber Additions As Password-Sharing Crackdown Bites

"We’re on track to meet our full year 2023 financial objectives (and) we’re pleased with the most recent launches of paid sharing," Netflix said.

Updated at 4:22 pm EST

Netflix  (NFLX) - Get Free Report posted softer-than-expected first quarter additions to its streaming service Tuesday amid the launch of it crackdown on password sharing, sending shares sharply lower in after-hours trading.

Netflix said profits for the three months ending in March were pegged at $2.88 per share, down 18% from the same period last year but just ahead of the Street consensus forecast of $2.86 per share.

Group revenues, Netflix said, came in at $8.162 billion, up just 3.3% from last year and modestly shy of analysts' estimates of an $8.175 billion tally. The group added 1.75 million new subscribers over the quarter, missing the Street forecast of just over 2 million.

Netflix, which no longer provides specific guidance on new subscriber additions, said its sees earnings in the region of $2.84 per share and revenues of $8.24 billion for the June quarter.

"We’re on track to meet our full year 2023 financial objectives. For Q2’23, we forecast revenue of $8.2 billion, up 3% year over year, or 6% growth on an F/X neutral basis," Netflix said in its quarterly shareholders letter. "We’re pleased with the most recent launches of paid sharing, and while we could have launched broadly in Q1, we found opportunities to improve the experience for members."

"We learn more with each rollout and we’ve incorporated the latest learnings, which we think will lead to even better results," the statement added.

Netflix shares were marked 3.6% lower in after-hours trading immediately following the earnings release to indicate a Wednesday opening bell price of $321.74 each.

Netflix has said password sharing, which involves an estimated 100 million households that aren't currently paying for the service, "undermines our long-term ability to invest in and improve".

Its new password sharing crackdown, which uses location services data, will ask users to pay an added fee required to use a device to access Netflix at different locations.

Netflix rolled out the first phase of its 'paid sharing' effort last month in Canada, New Zealand, Spain and Portugal, and will likely launch its main U.S. focus before the first half of the year.

That will boost overall net subscriber additions, which are expected to rise by 3.43 million over the three months ending in June, but the revenue gains for each new sub gained by signing up to a password sharing account will be around half of a full-scale membership.