Netflix reports earnings today. Here’s what you need to know.

Netflix shares fell as much as 9% in after-hours trading following the earnings report. Half an hour later it was trading almost flat.

For the quarter, Netflix had revenue of $8.17 billion, up 3.7%, with earnings of $2.88 per share. The company had forecast $8.2 billion in revenue and earnings of $2.82 per share. Wall Street consensus estimates had called for $8.2 billion and $2.86 per share. The company has stopped giving a specific forecast for subscriber growth.

For the June quarter, Netflix sees revenue of $8.24 billion, up 3.4%, with earnings of $2.84 per share; that̵[ads1]7;s below the old Wall Street consensus of $8.5 billion and $3.07 per share. The company said net additions paid in the quarter should be “about equal” to the first quarter, which would be below the Street consensus forecast of 3.7 million.

On the other hand, the company raised its forecast for full-year free cash flow to at least $3.5 billion, from a previous forecast of at least $3 billion.

Netflix also said it expects the U.S. launch of “paid sharing,” its program to crack down on password sharing, in the second quarter. The company launched paid sharing in four countries in the first quarter — Canada, New Zealand, Portugal and Spain — and said it is “pleased with the results.” The company noted that average revenue per membership globally was down 1% in the quarter from the same period last year. The company noted that its subscription base in Canada is now larger than before it implemented paid sharing.

The company said that moving the launch of paid sharing into the second quarter should result in “a better result for both our members and our business.”

Operating income in the latest quarter was $1.7 billion, above the company’s forecast of $1.6 billion, reflecting “ongoing expense management and the timing of hiring and content spending,” Netflix said. The company sees second-quarter operating income of $1.6 billion, with an operating margin falling to 19% from 20%, largely due to the strengthening of the dollar against other currencies.

Netflix said it bought back 1.2 million shares in the quarter for $400 million.

Netflix said its long-term financial goals remain unchanged — it seeks to produce double-digit revenue growth while expanding operating margins and delivering growing positive free cash flow. The company added that it expects constant foreign exchange revenue growth to accelerate in the second half of the year as its paid sharing program rolls out and its advertising business grows. Netflix said it still expects a full-year operating margin of 18% to 20%.

As for recent price cuts in some markets, Netflix noted that in December 2021, the company cut its prices in India by 20% to 60%, leading to better engagement and 24% growth in currency-neutral revenue in the country in 2022. Encouraged by this result, the company cut prices in 116 countries in the first quarter, which together accounted for less than 5% of 2022 revenue.

Regarding the newly introduced ad-supported subscription tier, Netflix said it is “pleased with our progress across all key dimensions: member experience, value to advertisers and increased contribution to our business.” The company said engagement with the ads has exceeded initial expectations. Netflix also said its ad-supported tier now has roughly 95% content parity globally with ad-free plans.

Netflix also announced today that it will completely shut down its original DVD-to-mail service in September.

“On September 29, 2023, we will send out the last red envelope,” the company said on Twitter. “It has been a real pleasure and honor to deliver movie nights to our wonderful members for 25 years. Thank you for being a part of this incredible journey, including this last season of red envelopes.”

Write to Eric J. Savitz at eric.savitz@barrons.com