Inflation, conflict in Ukraine and fierce competition contributed to a loss of 200,000 subscribers and erased about $40 billion of stock market value, the video streaming giant says.
Netflix has said inflation, the Russian offensive in Ukraine, and fierce competition contributed to a loss of subscribers for the first time in more than a decade and predicted more contraction ahead, marking an abrupt shift in fortune for a streaming company that thrived during the pandemic.
Netflix's 26 percent tumble after the bell on Tuesday erased about $40 billion of its stock market value. Since it warned in January of weak subscriber growth, the company has lost nearly half of its value.
The company said it lost 200,000 subscribers in its first quarter, falling well short of its forecast of adding 2.5 million subscribers. Suspending service in Russia after the Ukraine assault resulted in the loss of 700,000 members.
The poor results pummeled other video streaming-related stocks, with Roku ROKU.O dropping over 6 percent, Walt Disney DIS.N falling 5 percent and Warner Bros Discovery WBD.O down 3.5 percent.
"We're not growing revenue as fast as we'd like," Netflix said in an earnings letter.
"Covid clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the Covid pull forward."
'Doubling down' on content creation
The Silicon Valley tech firm reported a net income of $1.6 billion in the recently ended quarter, compared to $1.7 billion in the same period a year earlier. Netflix shares were down some 25 percent to $262 in after-market trades that followed the release of the earnings figures.
Netflix believes that factors hampering its growth include the time it is taking for homes to get access to affordable broadband internet service and smart televisions, along with subscribers sharing their accounts with people not living in their homes.
The streaming giant estimated that while it has nearly 222 million households paying for its service, accounts are shared with more than 100 million other households not paying the television streaming service.
Netflix last year began testing ways to make money from people sharing accounts, such as by adding a feature that lets subscribers pay slightly more to add other households.
Another factor for Netflix is intense competition from titans such as Apple and Disney.
"Our plan is to reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix –– in particular the quality of our programming and recommendations," Netflix said, adding that it is "doubling down" on content creation.