Netflix (NFLX) shares are tanking 35% on Wednesday afternoon, their worst daily performance since 2004 after an unexpected decline in first-quarter net subscribers.

“I think what we got here was a significant disappointment," Truist Securities equity research director Matthew Thornton told Yahoo Finance Live.

“The real culprit here is churn," he said. "That’s why you’re seeing the surprise, and that’s why you’re seeing the violent reaction this morning,” he added. (Churn is the rate at which subscribers discontinue their service.)

The streaming giant lost subscribers upon exiting Russia following Moscow’s invasion of Ukraine — and amid an increasingly saturated North American market.

“Some of it was macro related, and some of it is industry related,” said Thornton.

Netflix has been increasing prices in the U.S., Canada and other countries, and devising ways to prevent account sharing. Streaming-related stocks like Disney (DIS) and Roku (ROKU) were under pressure on Wednesday in sympathy with Netflix.

Though the landscape for streamed content has become crowded, “most of the competitors really don’t have the same geographic footprint or exposure, at least not yet, that Netflix has,” added Thornton.

Netflix's decline in new subscribers was a surprise to Wall Street. Analyst had been expecting decelerating, but still positive growth for the first quarter of 2022.

The company says it expects an even steeper drop in new users for the current quarter.

"Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds," Netflix said in a letter to shareholders. "The big COVID boost to streaming obscured the picture until recently."

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