Netflix (NFLX 4.17%) stock was essentially unchanged (it slipped 0.1% to be exact) in after-hours trading on Tuesday, following the video streaming giant's release of its results for the first quarter of 2023.

The report was what Wall Street calls "mixed" -- revenue slightly missed the analyst consensus estimate, while earnings slightly exceeded it. Like revenue, paid net subscriber additions also fell short of the Street's expectation, but this metric was much improved from the year-ago period's result.  

Here is an overview of Netflix's first quarter, along with its second-quarter guidance, centered on six key metric categories.

1. Revenue grew 3.7%

Netflix's quarterly revenue grew 3.7% year over year (and 8% in constant currency) to $8.16 billion. This result missed the $8.18 billion Wall Street consensus estimate, as well as the company's own guidance of $8.17 billion.

Revenue growth was driven by a 4% increase in average paid subscriptions offset by a 1% decline in average revenue per subscriber. The only reason the latter number declined is the strength of the U.S. dollar relative to most other currencies; in constant currency, average revenue per subscriber increased 4%.

2. Paid subscribers increased 1.75 million 

In Q1, the company added 1.75 million paid net subscribers. While this result missed the 2.2 million Wall Street estimate, it compares favorably to the year-ago period when the company lost about 200,000 net subscribers. Netflix ended the quarter with 232.5 million global paid subscribers, up 4.9% year over year.

One reason for the pickup in paid subscribers over the last year is the company's addition of a lower-priced, ad-supported service tier in the fourth quarter of last year. 

Netflix added paid subs in three of its four regions: 

  • U.S./Canada (UCAN) -- added about 100,000
  • Europe, Middle East, and Africa (EMEA) -- added about 640,000
  • Asia Pacific (APAC) -- added about 1.46 million
  • Latin America (LATAM) -- lost about 450,000 

The company attributed the net loss of subs in LATAM to a pull-forward effect from the prior quarter, when it had a big gain of 1.76 million subs, along with "ongoing macroeconomic softness" in the region.

3. Operating income declined 13%

The quarter's operating income decreased 13% year over year to $1.71 billion, which translated to the operating margin (operating income divided by revenue) declining from 25.1% to 21%. This decline was driven by the timing of content spending and currency headwinds. 

Operating results were better than management's guidance, which was for an operating margin of 19.9%.

4. EPS fell 18% but beat expectations

Net income was $1.31 billion, or $2.88 per share, down 18% from the year-ago period. This result slightly surpassed the earnings per share (EPS) of $2.86 that analyst had expected. It also beat the company's guidance of $2.82. 

5. Cash flow from operations soared 136%

The quarter's cash generated from operations surged 136% year over year to $2.18 billion. Free cash flow was $2.11 billion, up 164% from the year-ago period.

Netflix ended the quarter with $7.8 billion in cash, cash equivalents, and short-term investments, up from $6.1 billion in the prior quarter. It had $14 billion in long-term debt.

6. Second-quarter revenue expected to grow 3.4%

For the second quarter, management guided for:

  • Revenue of $8.24 billion, which would equate to growth of 3.4% year over year (and 6% in constant currency). Wall Street had been modeling for revenue of $8.48 billion. 
  • Operating income of $1.57 billion, roughly flat year over year, and an operating margin of 19%, compared with 19.8% in the year-ago quarter. The forecast decline in operating margin is attributable to the relative strengthening of the U.S. dollar.
  • EPS of $2.84, which would equate to a decline of 11% year over year. Wall Street had been modeling for EPS of $3.05.

A decent quarter 

Netflix had a decent quarter, with sub growth and cash flows being notable bright spots.

In 2023, the company should continue to benefit from its late 2022 rollout of ad-supported subscription plans. Moreover, management expects its launch of paid-sharing plans will contribute to revenue growth this year. These plans -- which are part of the company's crackdown on password sharing -- have rolled out in several markets, but the launch in the United States was pushed back from the end of the first quarter to the end of the second quarter.