This story originally appeared in The Technology Letter and is republished here with permission.

Shares of Netflix are down almost 6% in late trading despite the company beating on revenue and profit with its Q1 report, and forecasting this quarter’s profit higher as well, with new subscribers coming in well above consensus.

Seems that after a 25% run-up this year, people are taking profits on what looks to be less upside in the current quarter. Tonight’s drop is the reverse of the large gains the stock saw the prior two quarters. The giant addition of subscribers in the January report boosted the stock by 11% at the time, but, clearly, adding subscribers doesn’t always carry the day for the stock.

But there’s also a disheartening surprise in the forecast section of the shareholder letter: Netflix will stop disclosing the number of members next year.

First-quarter revenue of $9.37 billion, up 15%, year over year, and profit per share of $5.28 was ahead of Street consensus for $9.27 billion and $4.52, per FactSet. The number of “net” subscriber additions, 9.3 million, was more than double the consensus for 4.59 million.

The company continued to make progress with its advertising-supported plans, it said, with members on its ad-supported plan rising by 65%, although Netflix continues not to disclose the actual numbers.

The company’s free cash flow came in quite a bit higher, $2.1 billion versus consensus for $1.8 billion.

For the current quarter, the company sees revenue and profit of $9.5 billion and $4.68 per share, which is higher on the profit side versus consensus for $4.54, but a tad lower than consensus for revenue of $9.53 billion.

The company said net adds will be lower this quarter than last because of the typical “seasonal” pattern of the business.

For the full year 2024, the company sees revenue rising by 13 to 15%, higher than what it said last time, “healthy double-digit” growth. Netflix also raised its operating margin forecast a point to 25% for the year, a point higher than the current Street consensus.

In the shareholder letter, management described how a strict membership count has less meaning to its business, and so it plans to stop reporting member numbers next year:

As we’ve noted in previous letters, we’re focused on revenue and operating margin as our primary financial metrics—and engagement (i.e. time spent) as our best proxy for customer satisfaction. In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential. But now we’re generating very substantial profit and free cash flow (FCF). We are also developing new revenue streams like advertising and our extra member feature, so memberships are just one component of our growth. In addition, as we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact. It’s why we stopped providing quarterly paid membership guidance in 2023 and, starting next year with our Q1’25 earnings, we will stop reporting quarterly membership numbers and ARM.

That decision to not disclose stuff is similar to moves by other tech giants. Think of how Apple stopped reporting iPhone unit sales a few years ago. In these cases, it doesn’t seem like the lack of disclosure ultimately hurts companies. Investors might protest a little, but they wind up going along with management’s decision.

The more urgent question for the business is how advertisers will receive a lack of such disclosure. On July’s earnings call last year, co-CEO Greg Peters emphasized that the scale of the company’s audience is key to luring advertisers:

“The first priority that we’re focused on is scale,” he said. “We know that reach is one of the predominant considerations or the dominant considerations that advertisers have when they think about where to go to spend their dollars.”

If the company has 269.6 million paying members now, and if that rises by, let’s say, double digits, to something over three hundred million in a year’s time, is that enough of a membership base for advertisers if the company then ceases to disclose the number? Or will they selectively disclose the number to the best advertisers?

Combine the lack of total disclosure with a lack of disclosure about how many, or what percentage, of subscribers are on an advertising-supported plan, and you have a, kind of, compounded lack of disclosure . . .

As Bernstein analyst Laurent Yoon quips in his note Thursday night, Netflix is “replacing the cable box with a black box.”

He’s not so sure this will sit with investors, as it means a maturing business:

No more subscriber and ARM disclosures starting in 2025. On the one hand, a stock that has historically traded on a single Net Sub Adds number over-focuses the company and investors on a single near-term KPI, and we’re probably at peak growth. Fewer disclosures is a rite of passage for large tech companies namely Apple, Google, and Meta. 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.

This story originally appeared in The Technology Letter and is republished here with permission.