Netflix Q2 2020 Quarterly Earnings: Netflix's Q3 Forecast Disappointed The Market
The world's largest subscription video streaming service, Netflix, continued to actively expand its subscriber base in the second quarter amid forced self-isolation of people around the world. But investors' concerns about the rest of the year caused a decline in stock prices.
In the reporting quarter, the company's net income rose to $720 million, or $1.59 per share, from $270.7 million, or $0.60 per share, a year earlier. Revenue jumped to $6.15 billion from $4.92 billion.
The number of new subscribers to paid services increased by 10.1 million in the quarter, exceeding the 10 million mark for the second quarter in a row, due to the huge number of people forced to stay at home amid the coronavirus pandemic. The company itself expected to attract 7.5 million customers.
Analysts polled by FactSet, on average, predicted earnings of $1.82 per share on revenue of $6.08 billion, and the number of new subscribers - 8.21 million.
Netflix released quarterly reports after the end of major trading on Wednesday. In electronic trading immediately after its release, the shares fell in price by more than 9%.
In a letter to shareholders, the service's management acknowledged that user growth would slow in the second half of the year.
The company's forecast for the third quarter was weaker than market expectations. Netflix plans to generate revenue of $6.33 billion, while analysts polled by FactSet, on an average estimate, the figure at $6.4 billion. The number of subscribers, according to the service's estimates, will grow by only 2.5 million, with the consensus forecast at 5.4 million. Netflix forecast earnings of $2.09 per share, with an average expert estimate of $2 per share.
Netflix also announced changes to its management team. Ted Sarandos, who has been with the company for more than 20 years and is responsible for the service's content, has been named one of Netflix's CEOs. He will share this position with co-founder reed Hastings.
Netflix's capitalization has grown by 63% since the beginning of this year, while the S&P 500 stock index has declined by 0.5% over this period.