Netflix Says Demand ‘Stable’ Amid Recession Fears

Shares of Netflix are sharply higher in after-hours trading on Thursday (April 17), as the world’s largest online streaming platform reported first-quarter earnings that beat the Wall Street consensus and revenue that was in line with expectations.

Netflix executives said that they see no impact from President Trump’s tariffs that have been roiling the macroeconomic picture — and don’t expect it to be a major factor going forward.

“We’re paying close attention, clearly, to the consumer sentiment and where the broader economy is moving, but based on what we are seeing by actually operating the business right now, there’s nothing really significant to note,” said Greg Peters, co-CEO of Netflix, during a conference call with analysts to discuss first-quarter earnings.

Peters said the company also takes comfort in the fact that “entertainment, historically, has been pretty resilient in tougher economic times.” That’s because whether people are happy or sad, they still watch TV and movies.

In past recessions, Netflix has been “generally quite resilient,” Peters added, meaning the company expects to do the same if a recession comes today.

Moreover, Peters pointed out that Netflix offers an ad-support $7.99 a month plan in its largest markets, which is an “incredible entertainment value” that “also gives us more resilience.”

“It’s an accessible price point, and we really do expect the demand for entertainment to remain strong,” Peters said.

As for macroeconomic uncertainty cutting into advertising revenue, Peters said advertising remains a small part of the top line so it would not have a big impact. “That smallness probably provides us an insulation to market shifts right now,” he said.

Netflix is the reigning online streaming platform with 302 million subscribers, followed by Prime Video (over 200 million) and Disney+ (125 million).

Netflix reported first quarter net income of $2.89 billion, or $6.61 per diluted share, compared with $2.33 billion, or $5.28 per share in the like quarter a year earnings. Revenue came to $10.54 billion, up from $9.37 billion. Netflix was expected to earn $5.66 per share on revenue of $10.5 billion, according to a consensus of analysts’ estimates.

CFO Spencer Neumann said on the call that subscriber growth was “healthy” in the first quarter, without elaborating. The just-concluded quarter is the first time Netflix did not disclose its new subscriber growth numbers.

The stock was up 2.7% in after-hours trading to $999.

Netflix said founder Reed Hastings is stepping down as executive chairman to be chairman of the board and a non-executive director.

Read more: Netflix Sees 19 Million New Subscribers in Q4

Netflix Aims for $1 Trillion

This week, The Wall Street Journal reported that Netflix internally is gunning for a $1 trillion market cap by 2030. It hopes to double revenue by then as well, to around $80 billion, and earn $9 billion in global ad sales.

The report said this year’s U.S. ad revenue is estimated at $2.15 billion, citing eMarketer figures. Netflix doesn’t disclose its ad sales numbers. Executives also want to triple Netflix’s operating income to $30 billion by 2030, the report said, and increase subscriber count to 410 million.

Ted Sarandos, co-CEO of Netflix, said internally executives do discuss “long-term aspirations.” But he said “this is not the same as forecast,” adding that its operating plans remain the same as its external forecasting guidance.

However, Peters added that Netflix does see potential for growth. Even with more than 300 million subscriber households, translating to an audience of more than 700 million people, it’s still a small slice of the global market.

“We’ve got plenty of room to grow our engagement, our revenue, our profit, and … become the most valued entertainment company,” Peters said.

Morningstar analyst Matthew Dolgin said in a research note this week that Netflix’s financial aspirations reported by the Journal “seem consistent” with management’s previous disclosures. However, these targets seem like “stretch” goals and will be “difficult to achieve,” the analyst said.

Dolgin said Netflix became successful by following a strategy of growing organically from the ground up instead of through costly acquisitions of traditional media businesses.

The company also was “wise” not to overspend by not bidding for a regular slate of major live sports programming, the analyst said, because it would have had to overpay to attract major sports leagues, the analyst said.

“These decisions now give Netflix the advantage of not having to manage a declining legacy business, and it isn’t burdened with expensive sports contracts or a subscriber base that is dependent on retaining sports rights,” Dolgin wrote.