Netflix shares rise after earnings report
Netflix didn’t blow the roof off its second-quarter earnings. It said it lost about 1 million subscribers globally in the quarter, marking the second straight quarter it has haemorrhaged customers. And it lost 1.3 million subscribers in the United States and Canada, marking the third time in the past five quarters that it has lost paying users in its most lucrative region based on average revenue per user. .
For the third quarter, Netflix expects to add just 1 million new subscribers – below the average analyst estimate of 1.8 million, according to StreetAccount. If Netflix continues and adds 1 million customers in the next quarter, it will have lost subscribers again this year for nine months. Compare that to analysts’ estimates earlier this year of almost 20 million net additions.
Still, Netflix shares soared more than 6% after hours trading. The company predicted it would lose 2 million subscribers in the quarter. A drop of 1 million is better than that.
(L-R) Reed Hastings and Ted Sarandos attend the world premiere of the Netflix television series ‘Marseille’ at Palais du Pharo in Marseille, on May 4, 2016 in Marseille, France.
Stephane Cardinale | Corby | Getty Images
Perhaps the positive investor sentiment toward the company is driven by the company’s concrete plans to reinvigorate growth, most of which won’t materialize until 2023.
Netflix has announced that its ad-supported product will launch in early 2023. This is actually a delay from late 2022, when Netflix hoped to launch the cheapest tier, according to a report from New May York Times.
In its quarterly letter to shareholders, Netflix also laid out its plans to crack down on password sharing, noting that it has launched two different approaches in Latin America to “find an easy-to-use paid sharing offering that we believe works for our members and our business”. that we can deploy in 2023.”
Netflix added, “We are encouraged by our early learnings and our ability to convert consumers to paid sharing in Latin America.”
The company closed its letter to shareholders with a little pep talk. Investors seem to be listening to head coaches Reed Hastings and Ted Sarandos.
“Re-accelerating our revenue growth is a great challenge,” the company wrote. “But we’ve been through tough times before. We’ve built this business to be flexible and adaptable and this will be a great test for us and our high-performance culture. We’re fortunate to be in a position of strength in as the leader in streaming entertainment by all metrics (revenue, engagement, subscribers, profit and free cash flow). We are confident and optimistic about the future.”
WATCH: CNBC’s full discussion of Netflix’s earnings