Netflix (NFLX) reported better-than-expected revenue andജ earnings for the first quarter as its subscriber growth surged. However, Netflix shares dropped nearly 4% to $587.09 in after-hours trading as the streaming giant's revenue guidance fellﷺ short of Wall Street estimates.

The streaming company's subscribers grew 16% year-over-year to 269.6 million, adding 9.33 million new paying customers in the three months ending March. After a lull in 2022, Netflix has seen its subscriber base growth even after implementing a password crackdown.

"We have built a hard to replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix. Improvement in these key areas is the best way to delight our members and continue to grow our business," the company said in the earnings press release.

Netflix posted net income of $2.33 billion or $5.28 per diluted sha🦂re. Revenue grew 14.8% to $9.37 billion, much higher than analyst expectations.

The company forecast almost 16% revenue growth for the second quarter to $9.49 billion, just shy of the $9.5 billion forecast by analysts p🌸olled by Visible Alpha. Netflix also estimates rev♎enue to increase 13%-15% for the full year. It raised its full-year operating margin guidance to 25%, up 100 basis points due to exchange rate movements.

But crucial to its revenue stream is the success of advertising on Netflix—both in terms of revenue from advertisers as well as tiered plans for subscribers looking for ad-free 🌄options.

The company noted its ads membership grew 65% from the past quarter, with the version of its service with ads representing 40% of all signups in markets where it's offered. The company also entered new partnerships to provide better measurement solutions for advertisers.