Shares drop despite positive second-quarter earnings

The company predicted paid subscribers would dip below estimates in the third quarter


Netflix shares dived Thursday evening after close, despite the streaming giant reporting relatively positive second quarter earnings amid the coronavirus pandemic.

Netflix on Thursday announced it had added 10.09 million more paid subscribers than expected, as audiences bound to their homes because of Covid-19 restrictions binge-watched its shows in the absence of live events and movie theaters.

The jump in global subscribers during the quarter ended 30 June was well above analysts’ estimates of 8.07 million, according to the research firm Refinitiv. Revenue for the company also rose 24.9% to $6.15bn in the second quarter, beating estimates of $6.08bn.

However, the company predicted paid subscribers would dip below estimates in the third quarter, in an early sign that the lockdown boost to streaming may be waning as stay-at-home orders ease and layoffs and furloughs across industries increase. The unfavorable forecast sent shares down 10% in after-hours trading.

Still, Netflix is easily in first place for streaming platforms and it is expected to stay that way, said Eric Haggstrom, an analyst at eMarketer. Worldwide, Netflix is on track to have 453.5 million individual users in 2020, according to eMarketer, up 9.1% over last year.

“The pandemic and associated lockdowns have massively accelerated the shift from linear TV to streaming video,” Haggstrom said. “Looking forward, even as lockdowns are relaxed and new competitors begin to scale their services, Netflix will extend its lead as the first stop for entertainment.”

This year, Netflix will reach 72% of viewers while Amazon Prime reaches 60% and Hulu reaches 38.9%, according to figures from eMarketer.

“We live in uncertain times with restrictions on what we can do socially and many people are turning to entertainment for relaxation, connection, comfort and stimulation. As we navigate these turbulent circumstances, we’re focused on our members by continuing to improve the quality of our service and bringing new films and shows to people’s screens,” the company said in its letter to shareholders.

Netflix also said it has appointed chief content officer Ted Sarandos as co-chief executive officer.

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