Tesla and Netflix Report Mixed Earnings, Nasdaq 100 Futures Weaker After Hours

Tesla and Netflix results:

• Tesla’s second-quarter results beat higher and lower estimates, but profitability is getting worse
• Netflix results were mixed, with revenue slightly below expectations but earnings per share above market expectations
• Shares of both companies traded lower after hours, which affected that Nasdaq 100 forward contracts

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Shares of Tesla (TSLA) and Netflix (NFLX) are in extended trading after the two companies reported somewhat mixed earnings in the April-June period, with the former down nearly 1% and the latter down 5% at the time of writing. Meanwhile, Nasdaq 100 futures were softer after hours than already underperforming during normal hours.

Focusing first on Tesla, the electric car maker reported earnings per share of 91 cents versus 79 cents expected, on sales of $24.9 billion, just ahead of the consensus estimate of $24.29 billion and 47% higher than the higher figure reported in the second quarter of 2022, indicating that management continues to deliver growth despite several macroeconomic challenges.

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Meanwhile, operating margin shrank to 9.6% from 11.4% previously, raising concerns of declining profitability, although that development may be related to the company’s recent decision to offer deep incentives and discounts as part of a strategy to boost sales in an environment where rates are at their highest level in more than 20 years.

Turning to Netflix, the world’s largest video streaming company posted EPS of $3.29 on revenue of $8.19 billion, with the second measure up 2.8% from the same three-month period last year. For context, Wall Street analysts expected the tech company to earn $2.84 per share on the $8.27 billion in acquisitions.

Netflix was also able to significantly increase its subscriber base after it introduced more affordable ad-supported subscription plans following its decision to start cracking down on password sharing in the spring. Against this backdrop, paid users rose by a staggering 5.9 million, surpassing the expected addition of 2.07 million members. And while that was a great achievement, the operating profit margin forecast of 18% to 20% failed to impress investors.

Here’s how both companies performed relative to Wall Street’s expectations:

Tesla

Earnings per share: $0.91 vs. $0.79 expected

Revenue: $24.93 billion vs. $24.29 billion expected

Netflix (NFLX):

Earnings per share: $3.29 vs. $2.84 expected

Revenue: $8.19 billion vs. $8.27 billion expected

source: DailyFX earnings calendar

Market forecast

Technology stocks have been on a tear and have re-rated sharply this year despite rising interest rates. The mixed performance from Tesla and Netflix suggests the premium valuation commanding the segment may be in question. This may prevent the Nasdaq 100 from rising, although traders will need to evaluate earnings from other big companies including Apple, Microsoft, Alphabet, Amazon, Nvidia and Meta before reaching general conclusions.

Tesla and netflix 5 minute chart

source: TradingView