Key points:

  • Netflix forecast subscriber growth of 5 million in Q1 and 3.7 million in Q2.
  • Netflix plans to invest $17 billion in content in 2024.
  • Analysts have expressed concerns about the exhaustion of the potential of measures to combat the disclosure of passwords.

The focus of Netflix‘s upcoming quarterly earnings report, scheduled for Thursday, will be the company’s strategy to maintain its subscriber growth momentum beyond two quarters. However, some analysts have expressed concerns that the effect of tightening policies on password sharing may gradually weaken.

What are investors and traders paying attention to ahead of Netflix’s upcoming report?

Number of subscriptions in 1st quarter

Netflix is projected to add 5 million new subscribers in the first quarter ended March. This is almost three times more than the 1.8 million new subscribers it gained in the same period last year. However, this figure reflects a slowdown in the growth rate observed in the last two quarters of 2023, which were marked by a sharp surge.

Projections for the second quarter ending in June include 3.7 million new subscribers.

Combating account password disclosure

Netflix’s successful implementation of a global anti-password strategy in May 2023 prompted similar measures from other streaming services such as Disney+. This decision not only stimulated Netflix shares to rise by a third in 2024, but also turned a new page in the industry.

However, according to some analysts, this approach has already reached the limit of its effectiveness in the United States, although its potential can still be realized in some international markets, such as India.

In key developed markets that initially saw significant growth due to crackdowns on password sharing, there may be concerns about the strategy’s potential running out.

Next level with ad support

Netflix beat forecasts for monthly subscribers at its ad-supported tier, reaching 23 million. In the 12 countries where it is available, the plan attracted 30% of all new enrollments.

Analysts predict the ad-supported plan, which costs $6.99 a month in the U.S., will grow even more popular this year given recent price hikes for ad-free plans.

Content expenses

During a conference call with investors last quarter, Netflix announced plans to invest $17 billion in content in 2024, but the company emphasized that it would approach this issue “smartly, intelligently and responsibly.”

Analysts say Netflix’s commitment to fixed spending on content has allowed the service to attract new subscribers at a time when competitors are cutting back on investment in pursuit of profitability on their streaming services.