Netflix reported the loss of just under 1 million subscribers globally for the second quarter, bettering its own forecast of 2 million lost users, as well as the projections of legions of suddenly dour equity analysts and insta-pundits breathlessly tracking the streaming company.
Even better, Netflix predicts that it will grow subscribers by around 1 million globally and return to growth in Q3.
Not as happily, the SVOD service provider reported diminished revenue growth of 8.6%, bringing in $7.97 billion from April-June.
Netflix, which has seen its quarterly revenue growth rate steadily drop from the astronomical 30%-plus range back in the halcyon days of 2019 and 2020, is predicting that Q3 sales growth will come in at around 4.7%. It's primarily blaming the strong U.S. dollar for that.
So far, investors seem more swayed by the notion that Netflix's subscriber growth prospects don't look nearly as bad as some of the third-party Chicken Little forecasts had suggested.
Netflix stock was up just under 8% in after-hours trading at the moment this sentence was written — this after rising 5.6% in regular trading on Tuesday.
Netflix started its tailspin in January, one which accelerated dramatically in April when it reported its first quarterly net customer loss in over a decade. Netflix saw its market capitalization shrink to less than a third of the peak it rose to last October.
The Silicon Valley company, cast out from FAANG and rendered to junk-bond status on the NASDAQ, began a series of layoffs. It also set out on an intense focus to develop a cheaper ad-supported tier to address the needs of its decreasingly elastic customer base.
Netflix just announced a partnership with Microsoft to get that off the ground, but it doesn't look like it'll happen until early next year. Ditto Netflix's attempt to crack down on password sharers with an additional $3 fee.
Despite the massive Q2 popularity of Stranger Things, which is arguably the streaming company's biggest domestic original series hit ever, Netflix lost 1.4 million subscribers in the U.S. and Canada during from April-June vs. a loss of around 400,000 in the same period last year.
However, Netflix touted 23% revenue growth to $900 million in its Asia-Pacific region, which includes growth priority country India. Netflix said it added 1.1 million APAC customers during Q2 and that the region is now producing almost as much as its also-nascent Latin America operation.
Look for APAC and India to dominate Netflix’s future earnings discussions.
As for revenue expansion, Netflix blamed the strong dollar for its quickening growth deceleration.
“The U.S. dollar continues to strengthen meaningfully against most currencies at a historic pace, with the Euro recently falling below the U.S. dollar for the first time in two decades, a significant headwind for all multinational U.S. companies,” Netflix said in its Q2 letter to shareholders. “We have high exposure to this unprecedented appreciation in the USD because nearly 60% of our revenue comes from outside the U.S. and swings in F/X have a large flow through to operating profit as most of our expenses are in USD and don’t benefit from a stronger USD.” ▪️
