Netflix (NFLX) Q2 2021 profit

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Reed Hastings, CEO of Netflix

Joan Cros Garcia | Corbis | Getty Images

Netflix shares fell about 1% after the bell on Tuesday after the company reported gains that missed bottom line and subscriber growth. The company’s earnings slightly exceeded estimates, confirming speculation that it will expand more to gaming.

  • Earnings per share (EPS): $ 2.97 versus $ 3.16 expected, according to Refinitiv analyst poll
  • Revenue: $ 7.34 billion versus $ 7.32 billion expected, according to Refinitiv
  • Global growth in net paid subscribers: 1.54 million versus 1.75 million expected, according to Factset

Analysts weren’t expecting a blockbuster quarter when it comes to the new additions of subscribers, expecting 1.75 million users, according to Factset. The company said it added 1.54 million users to close the quarter with over 209 million paid memberships.

“COVID has messed up our membership growth (higher growth in 2020, slower growth this year) something that is catching on. We continue to focus on improving our service to our members and bringing them the best stories from around the world “Said the company in a letter to investors.

Netflix said its revenue growth last quarter was due to an 11% increase in average paid streaming memberships and an 8% increase in average revenue per membership.

Most eyes were on what Netflix expects in the third quarter. According to FactSet data, Netflix expects 3.5 million net new entries, while investors had expected 4.87 million net new entries in the third quarter. Much of the optimism comes from Netflix’s upcoming content list, as much of it has been postponed into the second half of this year and next year.

In the first half of this year, Netflix said it had spent $ 8 billion in cash on content and expects content depreciation to be around $ 12 billion for the full year.

“If we hit our forecast, we will have added more than 54 million net paid additions in the past 24 months, or 27 million on a yearly basis over that period, which is in line with our pre-COVID-19 annual net additions,” the company said.

The company confirmed that it is also venturing into the gaming space. Netflix views gaming as a new category of content and compares it to its expansion into original films, animation, and unscripted television.

Potential games will be included in Netflix subscriptions at no additional cost, the company said. The focus will initially be on mobile games.

“As always, we’re excited about our offering of movies and TV series and expect a long way to go in increased investment and growth in all of our existing content categories, but since we’ve been creating original programming for nearly a decade, we think the It’s time to learn more about how our members value games, “the company said.

The company recently hired Mike Verdu, Facebook’s video game manager, where he served as vice president of augmented reality and virtual reality content as the company makes a deeper foray into gaming.

Netflix is ​​also feeling pressured by tough year-on-year comparisons as consumers found themselves in the middle of the Covid-19 pandemic last year, spending much more time online and needing entertainment.

Netflix said its engagement per member household decreased year over year in the second quarter but was still up 17% compared to the second quarter of 2019.

“The pandemic chopped off our growth unusually and skewed year-over-year comparisons as acquisition and engagement per member household increased in the first few months of COVID,” the company reported.

This story evolves. Please update for updates.

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