Netflix reported strong quarterly revenue and a rise in subscriptions, with 5.9 million customers added during the second quarter. This growth is attributed to the company’s efforts to curb password sharing, which is expected to “supercharge” subscriber growth. As a result of these positive developments, Netflix raised its earnings outlook for the third quarter and expects a boost in revenue in the second half of the year.
The company’s stock fell by as much as 8% in after-hours trading despite the positive results. The decline may be related to investors’ concerns over the impact of the ongoing Hollywood writers and actors strikes on Netflix’s content pipeline.
Netflix has been implementing new policies to discourage password sharing, offering a paid sharing initiative where subscribers can transfer profiles to people outside their household or pay an additional fee for each person using the account. The company’s subscriber base increased after the sharing policy rollout, with password sharers showing similar characteristics to longstanding customers, indicating a high retention rate.
The company’s focus on ad-supported streaming has also contributed to its growth, and it recently confirmed that it removed its “basic” ad-free plan, making its standard plan with ads the cheapest option. Netflix continues to invest in content development and is open to opportunities for mergers and acquisitions to build its content library.
Despite the positive outlook, Netflix is closely monitoring the impact of the Hollywood strikes and aims to reach an equitable agreement as soon as possible. The strike has affected the media industry, but Netflix is expected to fare better than other companies due to its extensive content offerings from international sources.
Overall, Netflix’s second-quarter performance and its strategies to boost revenue and subscriptions have shown promising results, leading to an optimistic outlook for the company’s future growth.