Netflix (NFLX) reported second-quarter earnings on Thursday, which initially sent shares down 6% after the close as the streaming giant’s revenue forecast missed Wall Street’s expectations for the current quarter. But shares recovered during the earnings call as investors digested another gain of more than 8 million subscribers and a top- and bottom-line beat.
Revenue reached $9.56 billion in the second quarter, up 16.8% from the same period last year, as the streamer continued to build on high-profile initiatives like cracking down on password sharing and its ad-supported tier, in addition to price hikes on some subscription plans last year. Analysts had expected $9.53 billion, according to Times Of Update.
Netflix forecast third-quarter revenue of $9.73 billion, below the consensus estimate of $9.83 billion. However, the company raised its full-year 2024 revenue growth forecast to 14% from 13% to 15%, up from 13% previously. It also expects full-year operating margins to reach 26%, up from 25% previously.
“Our updated revenue guidance reflects solid membership growth trends and business momentum, partially offset by the strengthening U.S. dollar against most other currencies,” management said in the earnings release.
Diluted earnings per share (EPS) beat expectations in the quarter, with the company reporting EPS of $4.88, above consensus expectations of $4.74 and well above the $3.29 EPS figure reported in the same period last year. Netflix forecast third-quarter EPS of $5.10, above consensus expectations of $4.74.
Subscribers once again came in strong, with more than 8 million additional users added following key shows, such as the final season of “Bridgerton.”
Subscriber additions of 8.05 million beat expectations of 4.7 million and followed the 9.3 million net additions the streamer added in the first quarter. The company had added 5.9 million paying users in the second quarter of 2023.
Before Thursday’s release, Netflix stock was on a roll. It is now up more than 30% year-to-date.
In May, Netflix announced it had won the rights to broadcast two NFL games that will air on Christmas Day as part of a three-season deal. The company also told advertisers at its Upfront presentation in May that its advertising segment had reached 40 million monthly active users worldwide, which is up significantly from the 15 million users the company revealed in November and up from 35 million users in the same period last year.
In the press release issued Thursday, the company said it was making “steady progress on scaling.” [its] “advertising activity” with memberships to the various advertising levels growing by 34% from one quarter to the next.
In another move to improve its ad-free tier, the company announced it would be phasing out its Basic plan in the US and France, after removing the sign-up 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.
“Given this sustained progress, we believe we are on the right track…
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