- Analysts counted Netflix among the safer bets during stay-at-home orders in the U.S. and the company showed substantial subscriber growth last quarter.
- Executives assured investors last quarter that content slated for the second quarter was still on track for release, since filming for those shows and movies had finished prior to the shutdowns.
Netflix reported its second quarter 2020 earnings after the bell on Thursday, the first full quarter to reflect the impact of the coronavirus pandemic.
The company announced that Netflix Chief Content Officer Ted Sarandos will become co-CEO alongside current CEO Reed Hastings. He will retain his current role and also join the Board of Directors. Chief Product Officer Greg Peters will also serve as COO.
Netflix missed analyst expectations on earnings per share but beat revenue expectations. Shares fell about 9% after hours as the company provided weak subscriber growth guidance for the third quarter.
Here are the key numbers:
- Earnings per share (EPS): $1.59 vs. $1.81 expected, according to Refinitiv survey of analysts
- Revenue: $6.15 billion vs. $6.08 billion, according to Refinitiv
- Global paid net subscriber additions: 10.09 million vs. 8.26 million expected, according to FactSet
Netflix provided third quarter revenue guidance of $6.33 billion, below analyst estimates of $6.40 billion, according to Refinitiv. It expects Q3 EPS of $2.09 versus analyst estimates of $2.01.
Netflix’s guidance for subscriber net adds fell far below analyst expectations. The company expects 2.5 million net subscriber additions for Q3, while analysts were expecting 5.27 million.
Executives explained the slowdown in their letter to shareholders, saying, “growth is slowing as consumers get through the initial shock of Covid and social restrictions. Our paid net additions for the month of June also included the subscriptions we cancelled for the small percentage of members who had not used the service recently.”
“TikTok’s growth is astounding, showing the fluidity of internet entertainment,” the company wrote to shareholders. “Instead of worrying about all these competitors, we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers. Our continued strong growth is a testament to this approach and the size of the entertainment market.”
Netflix said it does not expect its 2020 slate of content to be significantly impacted by production shutdowns created by the pandemic. It expects that current production setbacks will push more of its big titles to the end of 2021, but that the “total number of originals for the full year will still be higher than 2020.” Netflix plans to supplement its original content with other films and shows it’s acquired.