Netflix lost over 200,000 subscribers in the first
quarter of FY22 and forecasts another 2 million in the ongoing second quarter,
according to the company’s first-quarter report released on Tuesday.

Shares of the streaming services company plummeted over
35% to $214 in the early trade on Wall Street. On Tuesday, it sank 25% in
after-hours trading to close at $348.42 per share after Netflix reported its
first loss in worldwide subscribers in more than a decade.

Also Read | ‘Thor: Love and Thunder’ teaser amasses 209 million views in a day

In January, Netflix reported that it had 221.84 million
customers at the end of 2021. Netflix reported it slipped to 221.64 million
subscribers over the three months ending March 31, 2022, which includes the
premieres of ‘Bridgerton’ Season 2 and ‘The Adam Project’.

The streamer said several headwinds are impacting growth,
including competition and relaxation of pandemic restrictions. The company had
got a significant boost from coronavirus lockdown orders, as more people sought
digital entertainment. But people spent less time on digital platforms as
vaccines rolled out and mandate eased.

Also Read | Johnny Depp set to testify in defamation trial against Amber Heard

Slower household broadband growth also contributed to the
company’s weak forecast. According to Netflix estimates, 100 million households
are sharing their subscription passwords with other family or friends, making
it tough to grow memberships.

Netflix laid out plans to contribute to growth. The
company is considering a lower-priced ad-supported model and a crackdown on
password sharing. The results led to a series of downgrades from Wall Street
over concerns about the company’s long-term growth potential. Some analysts
believe that these changes will take a year or two to be relevantly
implemented.

Also Read | Pulitzer prize-winner Kendrick Lamar announces new album out in May

Bank of America analysts said, “Although their plans to
reaccelerate growth (limiting password sharing and an ad model) have to merit,
by their admission they won’t have a noticeable impact until ’24, a long time
to wait on what is now a show me a story”. The firm downgraded Netflix on a
weak quarterly report.

Netflix’s first-quarter financial reports beat Wall
Street’s estimates for earnings but fell short on revenue. Netflix announced
diluted earnings per share (EPS) of $3.53 on revenue of $7.868 billion against
the expected EPS of $2.89 on revenue of $7.93 billion. Revenue increased 9.8%
compared to the first quarter of 2021.

Also Read | Android TV 13 will make smart television more effective: Report

Operating income was reported as $1.97 billion, with a
25.1% operating margin. Netflix’s net income for the quarter was $1.6 billion.

Wells Fargo downgraded the stock to an equal weight that
“negative sub growth and investments to reaccelerate revenues are the nails in
the NFLX narrative coffin, in our view”.

Also Read | Joe Alwyn blames intrusive society for secrecy in dating Taylor Swift

Other streaming service companies also saw their shares
dip along with Netflix. Disney slid 5% after markets opened on Wednesday. Roku
tumbled more than 7%, Warner Brothers Discovery lost 5%, and Paramount stock
slipped 11.7%.

“Gross adds activity continues to be softer than
expected, as such, subscription companies could see similar pressures throughout
this earnings season, though we note NFLX is unique in that it is much more
penetrated, particularly when accounting for password sharing,” said Wolfe
Research in a Tuesday note. The firm maintained its outperform rating.