Netflix reports Q1 earnings after market close today. Revenue was $8.16B vs. $8.18B expected. EPS was $2.88 vs. $2.86 expected. Free cash flow increased dramatically from $802M to $2.117B YoY. Moody’s upgraded Netflix’s corporate debt to investment grade in the past quarter given Netflix’s improved financial health. In February, Netflix launched password sharing crackdown in four countries: New Zealand, Canada, Portugal and Spain and it has been received well. They are planning a wider launch globally, including the USA in Q2. Netflix is also upgrading its ads experience with more streams and improved video quality to attract a broader range of consumers who are willing to see ads to pay less for the subscription. Netflix is also set to sunset its DVD rental service later this year after 25 incredible years. (I am surprised people are still using the DVD service. Why would people wait for days for the DVD to arrive while they can press a button on their remote and watch the video instantly? Anyway, I digress.)
Overall, Netflix has a pretty decent quarter. Netflix is now a streaming giant with a large library of original content. They don’t have to spend like crazy to bolster their content library any more. They still have to spend on content but they can strike a better balance between profitability and content moat, hence the improved free cash flows. Their current growth drivers of ad-supported subscriptions and password sharing crackdown sound boring but well, that’s what investors want from them. I do hope they can come up with new growth drivers like how they transition from DVD to streaming. That will be so cool.