Netflix shares rise after earnings report
(L-R) Reed Hastings and Ted Sarandos attend the “Marseille” Netflix TV Serie World Premiere At Palais Du Pharo In Marseille, on May 4, 2016 in Marseille, France.
Stephane Cardinale | Corbis | Getty Images
Netflix didn’t blow the roof off its second-quarter earnings. It announced it lost about 1 million global subscribers in the quarter, marking the second consecutive quarter it has hemorrhaged customers. And it lost 1.3 million subscribers in the U.S. and Canada, marking the third time in the last five quarters it has lost paid users in its most lucrative region based on average revenue per user.
For the third quarter, Netflix forecast it will add just 1 million new subscribers — below the 1.8 million average analyst estimate, according to StreetAccount. If Netflix follows through and adds 1 million customers next quarter, it will still have lost subscribers this year through nine months. Compare that to analyst estimates from earlier this year of nearly 20 million net adds.
Still, Netflix shares soared more than 6% in after hours trading. The company had predicted it would lose 2 million subscribers in the quarter. A decline of 1 million is better than that.
Perhaps investors’ positive sentiment toward the company is being driven by the company’s concrete plans to reinvigorate growth — most of which won’t kick in until 2023.
Netflix announced its advertising-supported product will launch in the early part of 2023. That’s actually a delay from late 2022, when Netflix had hoped to debut the cheaper tier, according to a New York Times report from May.
In its quarterly shareholder letter, Netflix also outlined its plans to crack down on password sharing, noting 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 roll out in 2023.”
Netflix added, “We’re encouraged by our early learnings and ability to convert consumers to paid sharing in Latin America.”
The company closed its shareholder letter with a bit of a pep talk. Investors seem to be listening to head coaches Reed Hastings and Ted Sarandos.
“Reaccelerating our revenue growth is a big challenge,” the company wrote. “But we’ve been through hard times before. We’ve built this company 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 as the leader in streaming entertainment by all metrics (revenue, engagement, subscribers, profit and free cash flow). We’re confident and optimistic about the future.”
WATCH: CNBC full discussion of Netflix earnings