Netflix: Big Q2 Subscriber Gains, But Lower Growth Forecast For Q3

Although Netflix grew revenue by 25% in the second quarter to $6.15 billion with sharply high subscriber numbers, it has lower expectations in terms of subscriber growth for the third quarter. At the same time, the big subscription video service spent 7% less on marketing in the period.

Overall, global subscribers grew 10.09 million in the second quarter versus 2.7 million in the second quarter of 2019. Analysts estimated that Netflix would add around 7 million subscribers.

Netflix now has a worldwide membership of 192.95 million versus 182.86 in the first quarter. A year ago in the second quarter its global members totaled 151.56 million.

At the same time, Netflix estimates that third-quarter 2020 will add just 2.5 million -- much lower than the third quarter of 2019, which grew 6.8 million. Netflix's stock price sank 12% in after-hours trading just after its second-quarter financial results were released.

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Still, Netflix is forecasting third-quarter 2020 revenue to be up 19% to $6.3 billion from the same period the year before.

Much of the second-quarter growth (along with the first quarter) over-delivered on previous estimates due to more at-home viewing as a result of stay-at-home COVID-19 orders. Overall, Netflix added a big 25 million for the first six months of the year.

In the U.S., Netflix added 2.9 million subscribers  -- much more than analysts' estimates of around 1.7 million to 1.8 million. Total U.S./Canada members amount to 72.9 million.

Netflix says its content and marketing expenses were lower than expected, mostly due to the COVID-19 pandemic.

Concerning marketing, for example, in the second quarter it spent 7% less to $434.4 million versus $603.2 million in the second quarter of 2019. Ted Sarandos, now co-CEO as well as continuing as chief content officer, said during the earnings call:

"Our members spend a lot of time on Netflix every day. So it turns out the best place to talk to them about Netflix is on Netflix... [we're] spending less but doing more to attract buzz and attention to our shows, trying to cut through a world where there's a lot of choices."

Overall net income more than doubled to $720.2 million from $270.7 million.

Netflix says TV/movie production is now up and running in Germany, France, Spain, Poland, Italy, and the UK. Additionally, it resumed production on two films in California and two stop-motion animation projects in Oregon.

 
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