Netflix is set to report its first-quarter earnings on Thursday, but there’s a big twist. It will no longer break out subscription figures, which had been a central barometer that many on Wall Street used to gauge the health of its business.
Why the change? Netflix has said it wants to shift the conversation to other metrics like user engagement and revenue, which it contends are more indicative of its success as it matures.
After a blockbuster fourth quarter — when it had its biggest-ever haul of new subscribers, helped by live sports events — several analysts expect Netflix to have a more modest first quarter based on a softer content lineup.
So, in the absence of subscriber numbers, what will Wall Street be looking at?
“Frankly, I think all of us are going into this with a blindfold, not knowing what they’ll disclose,” Bernstein analyst Laurent Yoon told Business Insider. “But at the end of the day, it’s about the health of their financials and the margin expansion trajectory versus the last several quarters.”
Here are some other topics Wall Street will be focused on.
Its ads rollout: Analysts will be listening for any details on Netflix’s ad rollout, which it’s relying on to show substantial growth in the years to come. Netflix has said it expected to double its ad revenue haul this year after it increased its ad commitments by 150% during last year’s TV upfronts season, and analysts are holding them to it.
“The most important thing is to see if they are growing revenue because of advertising,” Wedbush Securities analyst Michael Pachter said. “I know they are, but would like some color on that. They should get lots of operating leverage from holding costs in check, so I expect big profits.”
Yoon also said he’ll be listening closely for intel on the health of the ad market.
Economic uncertainty: The big question hanging over Wall Street’s otherwise bullish stance on Netflix is how the on-and-off tariffs could impact its burgeoning ad business.
Netflix significantly dropped its ad rates after Amazon flooded the market by introducing ads to Prime Video last year. The company could face pressure to lower prices even more to keep advertisers spending amid a trade war. Morgan Stanley trimmed its advertising forecast slightly for Netflix in an April 8 note, while remaining bullish on the company.
Analysts will also be looking for co-CEOs Ted Sarandos and Greg Peters to discuss how economic jitters might dampen new user interest.
Netflix has been able to raise prices in line with the popularity of its entertainment, but analysts wonder if the macroeconomic environment could hurt its ability to keep raising prices around the world.
Ad tech: Netflix has built its own in-house tech to facilitate ad buying and rolled out new sports programming that’s popular with advertisers. Bringing adtech in-house can be complicated, though, and analysts will be looking for detail on Netflix’s progress as it’s weaned itself off Microsoft’s Xandr to sell ads using partners such as The Trade Desk and Google’s DV360. One question is whether Netflix has attracted any new advertisers this way, Raymond James analysts wrote in a recent note.
A related question is how much room is left to grow in the ad tier. Since launching in 2022, it has ramped up quickly by offering people a lower-priced option as it raised the price on ad-free versions and cracked down on password sharing. By November, the company said, it had reached 70 million global users. In January, it said that the ad plan made up over 55% of new sign-ups in countries where it’s available.
Creator content and sports: Analysts want to hear more about Netflix’s plans for sports programming, with its associated ad appeal. They’re also interested in what execs have to say about plans to build out a creator-driven content strategy, as YouTube increasingly dominates TV viewership.
“This increases the opportunity and necessity around advertising monetization success at Netflix, as YouTube has already built a big subscription revenue business,” Morgan Stanley analysts wrote. “It also increases our interest in Netflix pushing into creator-led content over time while also leveraging AI tools to drive monetization, personalization, and production efficiencies.”
Password sharing: Inquiring minds want to know: When will Netflix’s password sharing crackdown stop bearing fruit? “While the paid sharing benefit should slow in 2025, the company is still seeing incrementality from ad-supported users joining the service, and we see the potential for improving ad CPMs as the supply increase starts to slow,” Raymond James analysts wrote.
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