Today after the bell, Netflix reported its financial performance in the second quarter. After its second-quarter numbers came out, the popular video streaming service saw its value drop dramatically, with its 10% shares in after-hours trading at time of writing.
What happened to Netflix, a company that was expected to report growth driven by the fact that many consumers in its local market are confined to their homes? The company not only failed to produce second-quarter numbers that investors were uniformly excited about, but it also managed to forecast weaker-than-expected performance.
Perhaps either would have been acceptable, but not both. This is what Netflix told us:
- Netflix results: $ 6.15 billion in second quarter revenue generated operating revenue of $ 1.36 billion and net revenue of $ 720 million. In terms of per share, the company earned $ 1.59 in the three month period.
Investors were expecting $ 6.08 billion in earnings and earnings per share of $ 1.81, according to averages from analysts at Yahoo Finance. Thus, Netflix managed a slight bump in revenue, but lost dramatically in terms of earnings.
The company also exceeded expectations in terms of net customer additions, and CNBC reported that Netflix’s 10.09 million new subscribers exceeded estimates of 8.26 million.
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They are not the worst results, right? To fully understand the correction to the company’s stock price, we’ll need to look forward to what Netflix said about the third quarter:
- Netflix forecasts: $ 6.33 billion in revenue leading to operating revenue of $ 1.25 billion and net revenue of $ 954 million. In terms of per share, the company expects to earn $ 2.09 in revenue.
The company also expects to add 2.5 million new net subscribers in the third quarter. As the market had expected the company to generate $ 6.39 billion in third-quarter revenue and $ 2.00 in earnings per share, we again have a slightly mixed picture. But the modest aggregate net subscriber linked to Netflix’s slower-than-expected revenue growth seems to have scared the streets.
And with fear in the air that Netflix’s growth could fall below expectations, it lowered its share price. Perhaps the company is being conservative with its forecast of adding net subscribers, but investors didn’t seem to want to give it the benefit of the doubt.
More as the earnings season picks up.
