Netflix has reported a strong second quarter, adding over 8 million new subscribers and beating analyst predictions.
However, the company tempered its success by issuing cautious guidance on its advertising business, which it expects to take until 2026 to become a major driver of revenue growth.
The company’s subscriber gain were driven by its crackdown on password sharing and the popularity of shows like “Bridgerton,” “Baby Reindeer,” and “The Roast of Tom Brady.”
Despite this success, Netflix warned that subscriber growth would slow in the third quarter compared to the same period last year.
Netflix’s advertising business, which launched in 2023, has yet to prove itself as a significant revenue driver.
The company’s vice president of ad sales, Peter Naylor, is departing, and analysts note that Netflix needs to scale up its advertising business to compete with Amazon, which has made a bigger impact in the ad market.
“Netflix is still the best and most profitable streaming company out there, but…some investors may sell on the generally good news and take profits now while waiting for a possible better re-entry point for the stock,” said Michael Ashley Schulman, chief investment officer at Running Point Capital.
The company reported diluted per-share earnings of $4.88 for the quarter, surpassing consensus forecasts of $4.74.
Revenue reached $9.56 billion, in line with estimates. Netflix shares initially fell but reversed losses to trade up 1% in after-hours trading. The stock has surged nearly a third so far this year.
Boluwatife Enome
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