Netflix Joins Apple, Meta in Withholding Key Data From Investors

(Bloomberg) — Netflix Inc. shares fell the most in nine months Friday, taking the shine off stellar first-quarter financial results following management’s decision to stop reporting quarterly subscriber data.

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This metric has long been the primary way Wall Street evaluated the company’s performance, but executives at Netflix, which now has almost 270 million subscribers, have tried to shift the focus to measures like sales and profit. Other tech giants like Apple Inc. and Meta Platforms Inc. have taken similar steps in recent years.

In the past, subscriber numbers have been wildly unpredictable, and the company has struggled to forecast them accurately. In 2022, Los Gatos, California-based Netflix said it would stop projecting quarterly customer data. The stock typically sees big swings the day after earnings reports.

On Thursday, Netflix reported better-than-expected first-quarter results, including 9.33 million new subscribers. But the shares slumped after the company said user growth this quarter would slow and that it will stop reporting customer numbers.

“Eliminating regular reporting of membership data raises questions around management’s confidence to further grow the base, though it is not implausible that the change is intended to reduce quarterly sentiment volatility around relatively small changes in true economic drivers,” Michael Morris, an analyst at Guggenheim Securities, wrote in a note to investors.

Netflix isn’t the only big tech company to pull back on disclosing some metrics in order to steer investors’ focus elsewhere.

In 2018, Apple said it would no longer report the number of iPhones, Macs and iPads sold each quarter, as it attempted to focus on its growing services unit. While some pundits praised the move as a way to highlight a potent new business model, others complained it was an attempt to hide the pain of a stagnant smartphone market. The shares had their worst day in four years.

Last quarter, Meta said it will no longer report the number of subscribers to its family of apps, which now total almost 4 billion people who use Instagram, Facebook and WhatsApp each month. The San Francisco-based company said it also won’t provide daily and monthly user numbers for its flagship Facebook app.

Beginning this quarter, Meta will report year-over-year changes in ad impressions and the average price per ad at the regional level, while continuing to report only daily active users across its family of apps.

“Fewer disclosures is a rite of passage for large tech companies namely Apple, Google, and Meta,” analysts at Bernstein wrote in a note. “On the other hand, removing growth disclosures signals a maturing business, and gives shareholders even fewer data points to underwrite forecasts. Time will tell how investors digest the change.”

The good news for Netflix is that its decision, while angering some investors, is unlikely to have any impact on customers — its primary focus.

In 2011, the company was forced to backtrack on plans to split its mail-order DVD and internet streaming services. Customers were outraged over plans to create a separate DVD offering called Qwikster, and to pay for each service separately. The company reversed the decision three weeks later.

Netflix’s growth in the latest quarter was aided by a crackdown on account sharing, which pushes viewers using someone else’s password to sign up on their own at a discounted rate. The company attracted new customers from all over the world, thanks to a strong slate of original programs, showing particular strength in the US and Canada. Those new subscribers helped the company beat forecasts for sales and earnings as well.

In explaining the decision to stop reporting subscriber numbers and average revenue per user, co-Chief Executive Officer Greg Peters said initiatives like the crackdown and a new ad-supported tier make those metrics less relevant.

“All of that means that historical simple math that we all did, number of members times the monthly price is increasingly less accurate in capturing the state of the business,” he said in a video interview Thursday.

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