Netflix beats Q1 2020 estimates, adds 15.77 million new paid subscribers

Netflix had earned $4.5 billion in Q1 2019. The company predicted its strong growth trend to follow in the following quarter.

Netflix recorded a 22.5% year-on-year growth in terms of the paid subscribers. (REUTERS)

At a time when companies have slowed down their hiring process due to a slump in the market owing to the Covid-19 lockdown, Netflix is enjoying a smooth sail. The video streaming giant just announced its quarterly revenue for the first quarter of 2020 wherein it said that it had beaten its quarterly estimates by a significant margin.

Netflix, in a letter to the investors, said that it had added 15.77 million new paid subscribers in the first quarter of 2020 as against the estimate of 7 million paid subscribers. This takes the company's total subscriber base to 182.86 million. The company recorded a 22.5% year-on-year growth in terms of the paid subscribers, which is slightly less than the figures during the same time past year. For reference, the company recorded a 25.2% YoY growth in terms of paid memberships last year. The company predicts a stronger growth in the second quarter of 2020 as well.

As far as the revenue is concerned, Netflix earned a total of $5.7 billion in the first quarter of 2020, which is significantly more than what the company earned during the same period last year. Netflix had earned $4.5 billion in Q1 2019. The company predicted its strong growth trend to follow in the following quarter.

"Our internal forecast and guidance is for 7.5 million global paid net additions in Q2," the company told its investors.

Netflix outlined three main impacts that the Covid-19 outbreak had on its business. "There are three primary effects on our financial performance from the crisis. First, our membership growth has temporarily accelerated due to home confinement. Second, our international revenue will be less than previously forecast due to the dollar rising sharply. Third, due to the production shutdown, some cash spending on content will be delayed, improving our free cash flow, and some title releases will be delayed, typically by a quarter. More on each of these three effects below," the company wrote in the letter.

Despite registering a strong growth in the first quarter of 2020, the company remained optimistically cautious. It said that the spike in its membership was temporary and that it was likely to decline in the following quarter.

"Like other home entertainment services, we're seeing temporarily higher viewing and increased membership growth. In our case, this is offset by a sharply stronger US dollar, depressing our international revenue, resulting in revenue-as-forecast. We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon," it added.