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Netflix (NFLX) reported second quarter financial results Wednesday that came in mixed as the platform continues efforts to trim costs and boost engagement in an increasingly competitive streaming landscape.
Revenue, although 2.7% higher compared to the year-ago period, missed estimates despite new initiatives like the crackdown on password sharing, which rolled out in the US in late May, along with the recently launched ad-supported tier.
The streamer also guided to third quarter revenue of $8.52 billion, below expectations of $8.67 billion.
Shares fell in premarket trading on Thursday as a result, down more than 7%.
Here are Netflix's second quarter results compared to Wall Street's consensus estimates, as compiled by Bloomberg:
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Revenue: $8.19 billion versus $8.30 billion expected
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Adjusted earnings per share (EPS): $3.29 versus $2.90 expected
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Subscribers: 5.89 million net additions versus 2.1 million net additions expected
Despite the revenue miss, profitability metrics like operating margin and free cash flow steadily beat expectations.
Operating margin hit 22.3% in the quarter, surpassing Netflix's own projection of 19%. The company reiterated its full-year operating margin guidance of 18% to 20%.
Free cash flow impressed at $1.34 billion, significantly above consensus calls of $542 million. Netflix boosted its full-year free cash flow guidance to $5 billion, up from the prior $3.5 billion, citing the impact of the double Hollywood strikes.
"We expect revenue growth to accelerate in the second half of ‘23 as we start to see the full benefits of paid sharing plus continued steady growth in our ad-supported plan," Netflix said in the release. "While we’ve made steady progress this year, we have more work to do to reaccelerate our growth. 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."
Just ahead of the results, the company quietly removed its lowest-priced ad-free streaming plan in the US.
The "Basic" plan had been offered to US consumers for $9.99 a month. The removal of this plan, which the company also did in Canada last month, comes as Netflix more heavily leans on the ad tier, which comes at a cost of $6.99 per month.
In regards to the password-sharing crackdown, Netflix said it plans to roll out paid sharing to almost all of the remaining countries on Wednesday. Revenue in each region is now higher than pre-launch, the company said, with sign-ups exceeding cancellations.