Netflix (NFLX) reported its second-quarter earnings on Thursday, but shares initially fell 6% in after-hours trading after the streaming giant’s revenue outlook fell short of Wall Street expectations for the current quarter.
The stock recovered slightly in premarket trading on Friday, narrowing losses to 1.4% as investors digested an increase in subscribers of more than 8 million and better-than-expected revenue and profit figures.
Second-quarter revenue reached $9.56 billion, up 16.8% from the same period a year ago, as the streamer continued to focus on key initiatives it implemented last year, such as raising prices for some subscription plans and cracking down on password sharing and ad-supported plans. Analysts had expected $9.53 billion, according to Bloomberg.
Netflix forecast third-quarter revenue of $9.73 billion, below the consensus estimate of $9.83 billion. The company raised its full-year 2024 revenue growth forecast to 14%-15% from 13%-15% previously. It also now sees its full-year operating margin rising to 26% from 25% previously.
“Our updated revenue guidance reflects solid membership growth trends 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) beat expectations for the quarter, with EPS of $4.88 coming in above the consensus estimate of $4.74 and well above the $3.29 EPS reported in the same period last year. Netflix now expects third-quarter EPS of $5.10, beating the consensus estimate of $4.74.
Subscriber numbers have again seen strong growth, adding more than 8 million new users, driven by major shows such as the most recent season of “Bridgerton.”
The subscriber increase of 8.05 million beat expectations of 4.7 million and follows the streamer’s net addition of 9.3 million in the first quarter. The company gained 5.9 million paying users in the second quarter of 2023.
Ahead of Thursday’s release, Netflix shares had been soaring, with the stock now up more than 30% since the start of the year.
In May, Netflix announced it had acquired streaming rights to two NFL games on Christmas Day as part of a three-season deal. The company also told advertisers during its upfront presentation in May that its ad demographic had reached 40 million monthly active users worldwide, a significant increase from the 15 million users the company announced in November and an increase of 35 million from the same period last year.
“We are steadily expanding our scale,” the company said in an earnings call on Thursday. [its] In the Advertising Business, advertising demographic membership increased 34% quarter-over-quarter.
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In another move to beef up its ad base, the company also announced it would phase out its basic membership plan in the U.S. and France after removing the sign-up option in the U.K. and Canada last year. The basic tier was previously its cheapest ad-free plan, costing $9.99 in the U.S.
“Given this continued progress, we believe we are on track to achieve significant advertising subscriber scale for advertisers in our advertising countries in 2025, and have a strong foundation for further growing advertising membership in 2026 and beyond,” the company said.
The growth came as streaming companies raised the prices of their ad-free subscriptions to attract more users to their ad-supported services. Netflix’s crackdown on password sharing also boosted revenue growth and boosted subscriber numbers across its platforms.
But the growth so far hasn’t been all smooth sailing: In April, Netflix announced that starting next year, it would stop reporting its subscriber numbers and average revenue per member (ARM), a key revenue metric.
This has raised concerns about the company’s long-term subscriber growth and whether its recent growth momentum can be sustained over the long term.
Netflix reported its second-quarter earnings amid growing expectations after the close of trading on Thursday. (Jaque Silva/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her at Yahoo Finance. translatorvisit me on LinkedIn or email me at alexandra.canal@yahoofinance.com.
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