Shares of Netflix (NFLX) slide lower in Friday's trading session after the company reported its first-quarter earnings results on Thursday.

Yahoo Finance's Alexandra Canal breaks down the biggest takeaways from Netflix's earnings, including positive yields tied to its password-sharing crackdown policy, its ad-supported tier, and what the streaming giant is changing about how it reports earnings in future quarters.

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This post was written by Angel Smith

Video Transcript

BRAD SMITH: And we're shifting gears here, as well this morning. Netflix shares, we're tracking NFLX as they're under pressure in pre-market trading, this coming after the streaming giant announces some changes to how they report subscriber numbers in the future. To break down what we learned from the report, Yahoo Finance reporter Alexandra Canal here with us in studio. Hey, Ali.

ALEXANDRA CANAL: Hey, Brad. Well, let's start with what you just laid out the fact that they are no longer going to be reporting subscriber figures. This is a significant announcement for the streaming industry at large, because this has been the metric that a lot of investors really base their decisions on.

The stock often falls or rises, depending on those subscriber gains or losses. So the fact that we're no longer going to be seeing that is pretty disappointing, and that's part of the reason why we're seeing shares dip lower in pre-market trading. Another reason is the fact that we saw revenue guidance for the second quarter along with full-year 2024 come in below expectations.

Coming into this print, it was really expected that Netflix would potentially beat and raise. And because that didn't happen, we saw shares react the way that they did, so something to keep in mind moving forward. But that is one thing that definitely is going to stick with investors.

Netflix said it wants to be deliberate in how they roll this out. That's why it's not happening until 2025. And along with no longer revealing subscriber figures, they're also no longer going to be revealing ARM, or average revenue per member. That is something that tells us monetization strategies for the company, so that's significant, as well.

You're seeing on your screen there another thing that we saw, is that the password sharing crackdown is paying off. Netflix is not the only company that has committed to password sharing crackdowns. It certainly was the first, and that's why you're seeing companies like Disney and Warner Brothers, Discovery start to roll out their own initiatives, because it is working for Netflix. The streaming giant added more than 9 million subscribers in the quarter. This comes after they added 13 million in the fourth quarter. So they're continuing to add subs, and that's another reason why they don't think they need to have their subscriber numbers disclosed, because all of these subs are different.