Netflix added 8 million new subscribers in the second quarter thanks to hit shows like Baby reindeer And Bridgerton, pushing the streaming service’s revenue and profits beyond Wall Street forecasts.
New subscriber registrations were the highest in a second quarter since 2020, when Netflix The number of new subscribers has exploded during the pandemic, but the company warned that new subscribers in the current quarter would be lower than last year, when its crackdown on password sharing went into effect.
Profit rose 48% to $4.88 a share on revenue of $9.6 billion, beating Wall Street forecasts. Netflix also raised its full-year revenue forecast, which it said “reflects a strong subscriber growth trend and business momentum.”
Netflix said its ad tier now accounts for 45% of signups in markets where it is available, but it doesn’t expect it to be a “primary revenue growth driver” until 2024 or 2025. Ad tier signups were up 34% from the previous quarter.
Netflix’s strength contrasts with traditional studios’ continued growing pains streaming servicesthat are unprofitable or generate only modest amounts of revenue. In a letter to shareholders, Netflix highlighted the struggles of its rivals, saying that “while they are investing heavily in premium content,” they are seeing “relatively low viewership across their streaming and linear television services.” [TV] continues to decline”.
Netflix co-CEO Greg Peters said the “number one priority is to gain scale” in its advertising business, which the company is doing by hiring new salespeople and building its own ad platform to replace Microsoft’s current system. “That opens the door to a whole range of innovations, a better user experience and better advertising features,” he said.
Paolo Pescatore, an analyst at PP Foresight, said achieving scale in the advertising sector had taken longer than expected, especially given Netflix’s “rich data on attitudes and viewing habits.”
“Netflix is up against even bigger tech giants with huge base and scale,” he said, citing Amazon, Meta and Google. “Netflix is clearly taking a lot longer to get going given its small advertising base.”
Netflix has added one-off sporting events to its lineup, including a golf tournament, an upcoming Mike Tyson fight and two Christmas football games, prompting Wall Street to wonder whether it would sign a deal with a sports league.
Co-CEO Ted Sarandos cast a chill on the idea of a big sports deal. “It’s very hard to have major league sports and make a profit when you have full seasons,” he said. “To make these Netflix [sports] “As far as events go, we don’t have a lot of tonnage to ship. These are economic conditions that we like and can live with.”
Asked about artificial intelligencePeters said Netflix is using “AI-like” technology to help drive more engagement with its users, adding that new generative AI technology “can improve discovery and recommendations” for its customers.
Sarandos said the impact of generative AI on the creative community was “difficult to predict.”
“A lot of directors and producers are experimenting with AI today and we need to see how it evolves,” he said. “We need to focus on the quality of storytelling.”