Netflix Gains 8 Million Subscribers in Q2
Netflix has announced a significant addition of over 8 million subscribers in the second quarter, driven by popular shows like "Bridgerton" and "Baby Reindeer" and a crackdown on password sharing. This gain far surpassed the predicted 5 million and brought Netflix’s global subscriber count to over 277 million.
However, the streaming giant issued a cautious outlook for the third quarter and revealed that its advertising business won't significantly drive revenue growth until at least 2026.
Despite these subscriber gains, Netflix expects slower growth in the next quarter, partly because the initial impact of the password-sharing crackdown may diminish. They also announced the departure of their vice president of ad sales, Peter Naylor.
"Netflix is still the best and most profitable streaming company out there," said Michael Ashley Schulman, chief investment officer at Running Point Capital, noting the general retreat of tech stocks affecting Netflix’s shares.
Netflix’s ad-supported memberships grew 34% in the quarter, although the company didn’t specify the number of subscribers choosing this tier. "Our ad business is growing nicely and is becoming a more meaningful contributor to our business," Netflix stated. However, the company acknowledges it needs more time to build this revenue stream, expecting it to become a primary contributor by 2026.
In its earnings report, Netflix posted diluted per-share earnings of $4.88, exceeding expectations of $4.74, with revenue hitting $9.56 billion, in line with estimates. The company’s profits reached $2.15 billion, a significant increase from $1.5 billion the previous year. Netflix’s stock has surged nearly a third this year, reflecting investor confidence in its strategy.
Netflix is also exploring new ventures to maintain its leading position in the streaming market. Plans include launching a multiplayer game based on "Squid Game" alongside its second season and games tied to "Emily in Paris" and "Selling Sunset." These initiatives are part of Netflix’s broader strategy to expand into areas like live events and sports.
The company’s focus on scaling its ad-supported subscriber base aims to meet advertiser demand. Netflix co-CEO Greg Peters emphasised that while the company has achieved its subscriber goals for 2025, the next challenge is monetizing its growing ad inventory.
"The near term challenge (and medium term opportunity) is that we’re scaling faster than our ability to monetize our growing ad inventory," Netflix noted.
Looking ahead, Netflix expects third-quarter revenue growth of 14% compared to the previous year and remains confident in its ability to innovate and expand. As the company continues to refine its ad strategy and explore new content areas, it aims to maintain its dominance in the competitive streaming landscape.
