Netflix added 5.89 million global subscribers in the second quarter of 2023, much better than what Wall Street anticipated. (The consensus from media analysts ranged from about +1.8 million subs to +2.2 million, give or take.) The company now has 238.39 million overall subs.
Also much better than predicted? The Q2 profit. On a per-share basis, quarterly earnings were $3.29; analysts had forecast $2.86. Overall net income was $1.488 billion.
While the growth translated to profit, it did not provide a revenue win. Netflix’s $8.187 billion of revenue from April to June was below Wall Street’s $8.3 billion consensus estimate, which explains why the stock (NFLX) is falling in after-hours trading. Netflix forecasts an even higher profit, $1.58 billion, for the summer quarter.
Netflix’s free cash flow declined from $2.117 billion in Q1 to $1.339 billion for the June quarter. No worries, executives touted in Wednesday’s shareholder letter; with the WGA and SAG-AFTRA strikes, lowered content spend is an inevitability, which will increase cash flow again.
April-June 2023 was quite the busy period for the streaming king. The single biggest thing that happened was the introduction of “paid sharing” — what Netflix calls its password-sharing crackdown — in the U.S. (and 100 or so other countries). Revenue from add-on memberships has yet to be materially realized, the company said.
Toward the end of the quarter, Netflix also revamped how it reports viewership, shaking up the company’s “Most Popular” chart in the process.
Netflix had some hits during the three-month period, though only one of them made that all-time Top 10. On the film side, Jennifer Lopez’s “The Mother” and Chris Hemsworth vehicle “Extraction 2” were the standout releases; “The Mother” is now Netflix’s ninth-most-watched movie ever. In series, which is Netflix’s bread and butter, “Bridgerton” spinoff “Queen Charlotte” was the big release in Q2.
“While we’ve made steady progress this year, we have more work to do to reaccelerate our growth,” Netflix wrote in its Wednesday letter to shareholders. “We remain focused on: creating a steady drumbeat of must watch shows and movies; improving monetization; growing the enjoyment of our games; and investing to improve our service for members.
Quarter-aside, it has actually been quite the busy day, news-wise, already for Netflix. This morning, the streamer removed its cheapest ad-free tier as an option for new or lapsed subscribers in the U.S. and the UK. The scrapped “Basic” plan bills $9.99 per month, which was leaving revenue on the table. These days, every dollar counts.
A video interview with Netflix co-CEOs Ted Sarandos and Greg Peters and CFO Spence Neumann, moderated by Jessica Reif Ehrlich of BofA Securities, will be available on YouTube at 3 p.m. PT.
