- Q2 revenue came in at $8.2bn, in-line with previous guidance
- 5.89m net new subscribers amid password sharing crackdown
- Expects revenue growth of 7% to $8.5bn in Q3
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“Netflix’s account sharing crackdown was an inconvenient hammer-blow for those of us who had their viewing interrupted, but it’s supercharged the streaming giant’s subscriber base. The sheer strength of Netflix’s appeal means millions of people opted to set up their own legitimate accounts, where there had been concerns the move would trigger a mass exodus. In this case, it seems that not-sharing is caring, at least that’s how Netflix investors will see it.
Netflix’s ability to reduce churn is firmly rooted in its best-in-class original content. Audiences engage more with original content, and while it’s expensive to make, it does keep eyeballs on screens in a bigger way. Streaming models which are more focussed on land-grabbing existing, pre-loved shows and movies risk subscribers retreating once they’ve binge-watched, or another provider gets hold of a different vintage series.
And keeping eyes glued to the Netflix app is front of mind in the inflationary environment, which is why the ad-supported tier was born. Initial progress seems positive, but we are realms away from knowing for sure if this venture is the cash cow it’s been sold as. Netflix needs to squeeze as much juice as it can from different avenues, given a recent lack of price increases could suggest that inflation is starting to bite Netflix’s ability to crank up its subscription price, as households look to trim their spending.
Ultimately, Netflix is the undeniable star of its own show. The market will be watching closely to assess if it can keep its light burning bright in the industry it created, and the incredibly high standards set by the 61% year-to-date rally are playing a part in the volatility being stirred by these results, which are sturdy by most standards.”
