Netflix reports Q2 revenue up 8.6% YoY to $7.97B, vs $8.04B est., and a 970K subscriber loss vs an estimated 2M subscriber loss; stock jumps 7%+ after hours
- Netflix only lost around 970,000 subscribers during the second quarter, a smaller loss than the 2 million it had projected last quarter.
CNBC Sarah Whitten
Context & Ripple Effects
Netflix’s subscriber-growth benchmark had already been weakening: its 2019 Q2 additions fell sharply from the prior year, and the company later recorded a U.S. and Canada subscriber decline even while global additions beat expectations. Against that backdrop, a loss materially below Netflix’s own forecast gives investors a less negative read on the slowdown, despite revenue coming in below consensus.
First-order effects
- Netflix lost about 970,000 subscribers rather than the 2 million it had projected, and its shares rose more than 7% after hours as the subscriber result outweighed the revenue miss in the immediate market reaction.
- The $7.97 billion revenue result fell short of the $8.04 billion estimate, keeping pressure on Netflix to show that revenue can hold up as membership growth weakens.
Second-order effects
- Netflix’s forecasts become a more consequential valuation benchmark: outperforming its own subscriber-loss guidance can move the stock even when quarterly revenue misses analyst expectations.
- The contrast with Netflix’s earlier slowing 2019 subscriber additions reinforces that investors are judging the company less on absolute growth than on whether it manages changing subscription expectations better than forecast.
Third-order effects
- If this pattern persists, subscription-video companies will be valued increasingly on the credibility and execution of their subscriber forecasts rather than on uninterrupted net-addition growth.
- Netflix’s results point to a maturing subscription business in which revenue resilience and expectation management must offset the reduced signaling power of subscriber growth.
The trend: Streaming subscriptions are moving from a growth-at-all-costs benchmark toward an earnings narrative centered on revenue durability and performance against guidance.
Related: Subscription growth gap · Subscription-bet accountability · Netflix · Netflix Q2 2021 results · Netflix Q2 2019 results
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Discussion
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@mikeisaac
Rat King
on x
truly wild that one tenth of one billion people use Netflix without paying for it & the company didnt stress over it much for years until forced to they must be freaked about potential viewer flight to slow-roll their new approach https://www.nytimes.com/... https://www.nytimes.c…
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@sherman4949
Alex Sherman
on x
A breakdown of Netflix subscribers gained/lost in the quarter by region: US/Canada: Down 1.3 million EMEA: Down 770,000 LATAM: Up 10,000 APAC: Up 1.08 million
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@carnage4life
Dare Obasanjo
on x
Netflix's 970K subscriber loss is even more negative when broken down by region. US/Canada: down 1.3 million EMEA: down 770,000 LATAM: up 10,000 APAC: up 1.08 million The stock is up because they expect to add 1 million subscribers in Q3 but curious if any growth from US/EMEA
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@ericjackson
Eric Jackson
on x
$NFLX declined 77% in 6 months from last November As bad as that was, they declined 79% in 4 months in 2011 during the Qwikster debacle
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@carnage4life
Dare Obasanjo
on x
Netflix comes across as strategically floundering these days. - Raising prices only for it to drive subscribers to quit the service. - Turning the product into Hulu with mass market ads. - Pivot to building franchises when their culture is cancel shows first, ask questions later …
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@klendathucap
@klendathucap
on x
If the melting ice cube that is $nflx can beat earnings, that should bode well for the rest of the market. https://twitter.com/...
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@mgsiegler
M.G. Siegler
on x
[GIF of the “Hello There Sandbagger” meme]
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@samro
Sam Ro
on x
Damn. You know your multi-billion media company is clamping down on expenses when instead of paying for Nielsen, they just pull critical industry data from a secondary source https://s22.q4cdn.com/... https://twitter.com/...
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@arjunkharpal
Arjun Kharpal
on x
Netflix didn't blow the roof off its second-quarter earnings. It announced it lost about 1 million global subscribers in Q2. But the stock jumped. That's what happens when expectations are so low $NFLX (via @sherman4949) https://www.cnbc.com/...
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@loudmouthjulia
Julia Alexander
on x
The ad play isn't just “we're missing subscribers.” Of course that's a point. But it's “we're missing subscribers, AND we're riding a plateau that dips into churn in our highest ARPU market pointing to a cap at about 75M compared to 100M once expected.” UCAN numbers are key.
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@shruti_shekar
Shruti Shekar
on x
no surprise here...netflix loses subs some estimated it was going to be 4 million that wasn't the case, they were able to survive cuz of stranger things and that was a strategic move https://www.cnbc.com/...
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@pkafka
Peter Kafka
on x
To underline it: Netflix is losing customers in the market it's been in the longest and where it has the most competition. https://twitter.com/...
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@karlbode
Karl Bode
on x
“hey, what if you were to pay more money for the same or worse service with additional annoying restrictions?” “wait, where are you going?” https://www.bbc.com/...
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@lucas_shaw
Lucas Shaw
on x
Netflix lost 1.3M customers in the US and Canada, and yet its shares are up 8% or so in post-market trading. It's back above $200/share for the first time in more than a month.
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@karlbode
Karl Bode
on x
again, Netflix: 1. already limits simultaneous streams per account, charging you extra if you want more. 2. just imposed a major price hike. 3. spent years saying password sharing was no big deal https://twitter.com/...
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@carnage4life
Dare Obasanjo
on x
Netflix growth is definitely over. They lost 970K subscribers in Q2 but since they forecasted that it would be 2M, the market response is actually positive. Definitely looks like raising prices was a killer for subscriber growth but they're doubling down. https://www.cnbc.com/...
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@newley
Newley Purnell
on x
“We're talking about losing 1 million instead of losing 2 million, so our excitement is tempered by the less-bad results,” Netflix Chairman and Co-Chief Executive Reed Hastings said in an analyst interview to discuss the results. https://www.wsj.com/... https://twitter.com/...
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@lucas_shaw
Lucas Shaw
on x
Netflix co-CEO Ted Sarandos says most of what people watch on Netflix can be in its ad-supported tier. But they will try to clear rights to other shows from outside studios.
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@xpangler
Todd Spangler
on x
On Netflix's Q2 earnings interview, COO and chief product officer Greg Peters said Netflix believes the per-subscriber economics on the ad-supported plan will be “neutral” or better than what it sees with traditional subscribers https://variety.com/...
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@xpangler
Todd Spangler
on x
Sarandos: “We will clear some additional content” for the ad-supported plan. “Not all of it. I don't think it's a material hold-back to the business.” https://variety.com/...