This Tuesday, July 19, Netflix delivered its economic results for the April-June 2022 quarter, where it reported the loss of 970,000 subscribers, a figure lower than what the company itself had projected: 1 million.
The streaming giant revealed in its second-quarter letter to shareholders that it currently has 220.67 million subscribers worldwide and expects to return to profit in the third quarter, projecting an addition of 1 million subscribers by July 1. to September 30.
In terms of actual financial performance for the second quarter, Wall Street forecast earnings per share (EPS) of $2.96 on $8.04 billion in revenue for the streamer’s second quarter, according to analyst consensus data provided by Refinitiv.
Revenue was up 8.6% year-over-year, or “13% excluding a $339 million foreign currency impact,” according to Netflix. Operating income for the quarter was $1.6 billion, with net income of $1.4 billion. Free cash flow for the quarter was $13 million compared to the prior quarter at $802 million.
The company also stated that it took a $70 million hit from firing costs in the second quarter after several rounds of layoffs, and is adjusting its operating model for slower top-line growth.
In a letter to investors, Netflix noted:
“We are likely to start in a handful of markets where ad spend is significant. Like most of our new initiatives, our intention is to implement it, listen and learn, and quickly iterate to improve the offering. So our advertising business in a few years will probably look quite different than it did on day one. Over time, our hope is to create a better-than-linear TV advertising model that is more seamless and relevant to consumers, and more effective for our advertising partners. While it will take some time to grow our membership base for ad level and associated ad revenue, in the long run, we believe that advertising can enable substantial incremental membership (via lower prices) and earnings growth ( through advertising revenue).