Netflix Q2 earnings report exceeded analysts' estimates on earnings per share.
Netflix (NFLX) shares rose after hours Tuesday after the company reported better-than-expected second-quarter subscriber trends and announced plans to launch an ad-supported subscription tier in early 2023.
Netflix reported Q2 adjusted earnings per share of $3.20, which is above the analysts' estimate of $2.98. Subscribers loss of 970,000 vs estimated loss of 2 million users by analysts.
Netflix's overall revenue in the first quarter of 2022 was $7.97 billion, falling short of experts' forecasts of $8.04 billion. Netflix stated in a letter to investors that increasing revenue growth is a current priority.
Despite reporting its second consecutive quarterly dip in subscription growth and losing 1 million viewers in the second quarter of 2022, Netflix's loss was less than the 2 million it had expected in its last report. After-hours trading saw a 10% increase in shares.
Growth in the Asia-Pacific area offset subscriber losses in the United States and Europe. The corporation lost around 1 million global members over that time, which was less than their projected loss of 2 million. Management now anticipates adding 1 million customers in the Q3, bringing the total to 221.7 million.
The revenue projection for the third quarter was also lower than projected, at $7.84 billion versus the estimated $8.1 billion.
"Our challenge and opportunity is to accelerate our revenue and membership growth by continuing to enhance our products, content, and marketing as we have for the previous 25 years," Netflix stated in a letter to shareholders.
According to Netflix, free cash flow in 2022 will be "roughly $1 billion, plus or minus a few hundred million dollars assuming no major additional changes in foreign exchange"
This year, Netflix's shares have plunged about 67 percent. Additional factors listed by the corporation for the downturn include password sharing, competition, and a poor economy. It also stated that the high dollar was affecting subscribers outside of the United States.
"Netflix is the market leader in video streaming, but until it creates additional franchises that resonate broadly, it will eventually struggle to stay ahead of competitors vying for its crown," said Ross Bene, an analyst at market research company Insider Intelligence.
Netflix stock, which finished Tuesday's trading session at $201 per share after a market bounce, has dropped about 70% year to date.
However, Wall Street remains optimistic that an ad layer would solve at least some of Netflix's troubles — and will be waiting for more information on the rollout during the company's Q2 earnings call.
Netflix stated last week that it had worked with Microsoft (MSFT) to help launch the new ad-based tier, has altered its timeframe.
Netflix and other streaming providers saw enormous growth during the epidemic, when millions were trapped in lockdowns, but the company has struggled to maintain its momentum. During the first year of the pandemic, it added more than 36 million members, and its market share increased by 86 percent from the end of 2019 to the end of 2021, while the S&P 500 increased by 48 percent.
Netflix's earnings announcement comes amid a broader slump in the IT industry as well as market-wide recession worries as inflation persists and Silicon Valley battles to sustain its viral pace. Investors will be paying careful attention when Meta, Google, Twitter, and Tesla have earnings calls in the coming weeks.
