Netflix Q2 earnings review

Netflix Q2 earnings review

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Netflix (NFLX, $201,63) has announced its Q2 earnings and the numbers haven't been great but are far better than what was expected. The streaming giant revealed it lost 970,000 subscribers during the three-month period that included the launch of the first part of “Stranger Things” Season 4. The company had predicted it would lose 2 million subscribers in the quarter. This caused shares to surge more than 8% in after-hours trading, its stock closed on Tuesday at $201.63 per share.

The company still had a rough three months, but its revenue did grow 9% to $7.9 billion a number that would have been higher had the value of the dollar not pushed down the value of currencies around the globe. However, this was still below analyst expectations of $8.05 billion. Netflix, which now has about 220.7 million subscribers worldwide, told investors that it could add back one million in the coming quarter. And Reed Hastings, the co-chief executive is bullish on the future of streaming. “It’s the end of linear TV over the next five, 10 years,” he said during a taped earnings call after the close of trading on Tuesday. 

The company also stated it took a $70 million hit for severance costs in the second quarter following several rounds of layoffs and is adjusting its operating model for slower top-line growth. Netflix also took an $80 million non-cash impairment charge for “certain real estate leases primarily related to rightsizing our office footprint.” 

Why it matters

When Netflix announced its predicted earnings for Q2 back in April - it supposedly sounded the death knell for the streaming giant. However, despite some pretty difficult numbers, Netflix has shown signs of recovery which is buoying investors. Positive sentiment toward the company is being driven by the company’s concrete plans to reinvigorate growth — most of which won’t kick in until 2023. It has announced its advertising-supported product will launch in the early part of 2023. Netflix execs previously said the streamer intends to spend around $18 billion on content this year. 


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