Netflix, an on-demand video streaming and video rental-by-mail company that launched its subscription service in 1999, has grown by leaps and bounds over the years. Netflix has put fear into Hollywood executives who believe the company is growing too large too fast, and has pushed Blockbuster into bankruptcy. It may even acquire original programming. 

Now, Netflix has released its first-quarter results, which showed an increase in revenue and higher gross margins. Profit skyrocketed from $32.3 million (59 cents a share) last year to $60.2 million ($1.11 a share) in the quarter ended March 31 of this year. Also, revenue increased 46 percent to $718.6 million, and the number of U.S. subscribers increased 63 percent from one year ago to 22.8 million today. Netflix has 23.6 million subscribers worldwide, which is a 69 percent increase from last year. 

In addition, gross margin widened from 37.8 percent to 39 percent.

Despite excellent Q1 results, analysts predict a disappointing second-quarter due to the additional spending Netflix has had to do in order to increase and maintain a broad archive of content for consumers. 

Netflix partially blamed the predicted Q2 results on the licenses it needs to stream movies over the web. 

"No one knows what to make of it," said Michael Pachter, a Wedbush analyst. "For the first time, they're talking about the streaming content costs growing dramatically, and now it's reflected in their guidance for the quarter." 

Pachter hopes Netflix will be "more transparent about its streaming costs."

Netflix shares fell 5.3 percent to $238.38 after the video streaming and rental giant announced that it expected per share to be between 93 cents and $1.15 in its second quarter.