Netflix (NFLX) reported second-quarter earnings on Thursday, initially sending the stock down 6% in after-hours trading after the streaming giant’s revenue forecast fell short of Wall Street’s expectations for the current quarter. But shares rebounded during the earnings call as investors digested another subscriber gain of more than 8 million and a beat on both the top and bottom lines.
Revenue was $9.56 billion in the second quarter, up 16.8% from the year-ago period, as the company continued to build on key initiatives like its crackdown on password sharing and ad-supported tier, as well as price increases last year on certain subscription 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 also raised its full-year 2024 revenue growth forecast to 14% to 15%, up from 13% to 15% previously. It also expects full-year operating margins to come in at 26%, up from 25% previously.
“Our updated revenue outlook reflects strong trends in membership growth and business momentum, which were partially offset by a strengthening U.S. dollar against most other currencies,” management said in the earnings release.
Diluted earnings per share beat estimates for the quarter, with the company reporting earnings per share of $4.88, beating the consensus estimate of $4.74 and well ahead of the $3.29 per share it reported in the year-ago period. Netflix also forecast third-quarter earnings per share of $5.10, beating the consensus estimate of $4.74.
Subscribers again saw strong growth, with the site adding more than 8 million new users in the wake of major shows, such as the final season of “Bridgerton.”
The 8.05 million subscriber additions beat expectations of 4.7 million, and followed the 9.3 million net additions the company added in the first quarter. The company added 5.9 million paid users in the second quarter of 2023.
In the run-up to the film’s release on Thursday, Netflix shares have been on a steady rise, with the stock currently up more than 30% year-to-date.
In May, Netflix announced it had won the rights to stream two NFL games scheduled to air on Christmas Day as part of a three-season deal. The company also told advertisers in its May presentation that its ad category had reached 40 million monthly active users worldwide — a big jump from the 15 million the company revealed in November and an increase of 35 million users compared to the same period last year.
In an earnings release on Thursday, the company said it was making “steady progress in expanding its advertising business” with ad tier membership growing 34% quarter-over-quarter.
In another effort to boost advertising, the company said it will phase out its Basic plan membership in the US and France after removing the subscription option in the UK and Canada last year. The Basic plan was previously the cheapest ad-free plan at $9.99 in the US.
“Given this sustained progress, we believe we are on track to achieve the critical ad subscriber metric for advertisers in our ad countries in 2025, creating a strong foundation from which we can grow our ad membership in 2026 and beyond,” the company said.
The growth comes as the streaming service has raised prices for its ad-free subscriptions in a bid to lure more users to its ad-supported offerings. Netflix’s crackdown on password sharing has also helped drive revenue growth and the platform’s overall subscriber base.
But the upward trajectory hasn’t been entirely smooth. In April, Netflix announced that it would stop reporting subscriber numbers, along with a key measure of profitability, average revenue per member, 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 Channel She is a senior reporter at Yahoo Finance. You can follow her on X @Ali_Canal, LinkedIn, You can email her at alexandra.canal@yahoofinance.com.
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