Finance
Netflix adds 8 million subscribers, which is disappointing in terms of revenue prospects
Netflix (NFLX) reported second-quarter earnings on Thursday, sending shares initially down 6% in after-hours trading after the streaming giant’s revenue outlook missed Wall Street expectations for the current quarter. But shares rallied on the earnings call as investors digested another more than 8 million subscribers and a rise in both the top and bottom lines.
Revenue reached $9.56 billion in the second quarter, up 16.8% from the same period last year, as the streamer continued to lean on top initiatives such as its crackdown on password sharing and ad-supported tier, in addition to last year’s price increases. with certain subscriptions. Analysts expected $9.53 billion, according to Bloomberg.
Netflix guided to $9.73 billion in revenue in the third quarter, a miss compared to consensus estimates of $9.83 billion. The company raised its full-year 2024 revenue growth projection to 14% to 15%, up from the previous 13% to 15%. It also expects full-year operating margins to be 26%, up from the previous 25%.
“Our updated revenue forecast reflects solid trends in membership growth and business momentum, partially offset by the strengthening of the U.S. dollar against most other currencies,” management said in the earnings release.
Diluted earnings per share (EPS) exceeded expectations in the quarter, with the company reporting earnings per share of $4.88, above consensus expectations of $4.74 and well ahead of the $3.29 earnings per share it reported in reported the same period last year. Netflix guided to third-quarter earnings per share of $5.10, ahead of the consensus call of $4.74.
Subscriber growth continued to be strong, adding more than 8 million users following major programming, such as the final season of “Bridgerton.”
The subscriber count of 8.05 million exceeded expectations of 4.7 million and follows the net 9.3 million the streamer added in the first quarter. The company had added 5.9 million paying users in the second quarter of 2023.
Ahead of Thursday’s release, Netflix stock was on a tear. Shares are currently up more than 30% year-to-date.
In May, Netflix announced it had won the streaming rights to two NFL games to air on Christmas Day as part of a three-season deal. The company also told advertisers during the May Upfront presentation that its ad level has reached 40 million global monthly active users – a significant jump from the 15 million users the company revealed in November and an increase of 35 million users on the year ago period.
In Thursday’s earnings release, the company said it is “making steady progress on scaling [its] ad business,” with advertising-level memberships growing 34% quarter-over-quarter.
In another effort to boost advertising levels, the company said it will phase out its basic membership in the US and France, after removing that sign-up option in the UK and Canada last year. The basic tier was previously the cheapest ad-free plan at a price of $9.99 in the US.
“Given this continued progress, we believe we are on track to reach a critical scale of advertising subscribers for advertisers in our advertising countries by 2025, creating a strong foundation from which we can further grow our advertising membership in 2026 and beyond,” said Company. said.
The growth comes as the streamer has increased the prices of its ad-free plans in an effort to attract more users to its ad-supported offering. Netflix’s crackdown on password sharing has also boosted revenue growth and expanded the platform’s overall subscriber base.
But it has not been a completely smooth path to the top. In April, Netflix said it would stop reporting subscriber figures starting next year, along with a key profitability measure, average revenue per member, or ARM.
That has raised concerns about the company’s long-term subscriber growth and whether or not its recent growth momentum can be sustained in the long term.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
