Netflix ( NFLX ) posted second-quarter earnings that beat expectations on Thursday, but the streaming giant’s earnings outlook for the current quarter missed Wall Street’s expectations, sending the stock down as much as 6% in after-hours trading.
Revenue hit $9.56 billion in Q2, up 16.8% from the same period last year, as the streamer continued to lean on top-line initiatives like password sharing and an ad support layer, in addition to last year’s price hikes. In some subscription plans. Analysts were expecting $9.53 billion, according to Bloomberg.
Netflix guided for third-quarter revenue of $9.73 billion, a miss compared to consensus estimates of $9.83 billion. The company increased its full-year 2024 revenue growth forecast to 14% to 15%, up from 13% to 15% previously. It expects full-year operating margins to reach 26%, an increase from 25% previously.
“Our updated revenue forecast reflects solid membership growth trends and business momentum, partially offset by the strength of the US dollar and other currencies,” management said in the earnings release.
Diluted earnings per share (EPS) reported EPS of $4.88 for the quarter, beating the consensus estimate of $4.74 and the $3.29 EPS it reported in the prior year. Netflix guided for third-quarter EPS of $5.10, beating consensus calls for $4.74.
Subscribers came back strong, adding another 8 million more on the heels of major programming like the latest season of “Bridgerton.”
The 8.05 million subscriber additions beat expectations of 4.7 million and follows the 9.3 million net additions the streamer posted in the first quarter. The company added 5.9 million paid users in Q2 2023.
Until Thursday’s release, Netflix shares were on a tear. Shares are currently up more than 30% since the start of the year.
In May, Netflix announced that it won the streaming rights to two NFL games that will air on Christmas Day as part of a three-season deal. The company told advertisers in its May preview presentation that its ad tier has reached 40 million global monthly active users — a significant improvement from the 15 million users the company disclosed back in November and an increase of 35 million users from the previous year. Period.
In Thursday’s earnings release, the company said it was “measuring steady progress [its] Ad Business” with ad tier members growing 34% in the quarter.
In another attempt to raise the advertising stake, the company said it will phase out membership of its Basic plan in the US and France after removing the opt-in option in the UK and Canada last year. The Basic tier was previously its cheapest ad-free plan priced at $9.99 in the US.
“Based on this sustained progress, we believe we are on track to achieve critical ad subscriber volume for advertisers in our ad countries by 2025 and further increase our ad membership in 2026 and beyond,” the company said. said.
The development comes as the streamer raised the price of its ad-free subscriptions in an attempt to attract more users to the ad-supported offering. Netflix’s password-sharing crackdown has boosted top-line growth and increased the site’s overall subscriber base.
But it hasn’t been an entirely smooth road upwards. In April, Netflix said it would stop reporting subscriber figures with a key profit metric, average revenue per member, or ARM, starting next year.
This has raised concerns about the company’s long-term subscriber growth and whether or not the recent growth momentum can be sustained in the long term.
Alexandra Canal Senior reporter at Yahoo Finance. Follow her on X @alli_kanal, LinkedIn, and email [email protected].
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