Netflix reported an increase of 19% in its revenues YoY to $7.3bn and an increase of 36% in its operating income YoY to $1.8bn. The company reported net income of $1.35bn in Q2 vs $720mn in 2Q2020 and $1.7bn in 1Q2021. The company ended the quarter with 209mn paid subscribers slightly ahead of its forecast. However, the growth of paid subscribers reduced to only 8.4% this quarter vs 27.3% in 2Q2020 and against 13.6% in 1Q2021. The paid net additions reduced to 1.54mn from 3.98mn in the last quarter and vs. 10.09mn in 2Q2020. The company also softened its guidance for Q3 where it forecasts a 9% addition in users at 3.5mn. They saw a 23% increase in users at 2.2mn in 3Q2020. EPS of $2.97 was lower than the $3.16 expected by analysts of a survey by Refinitiv. Revenues and net paid subscriber additions were slightly better than the analysts expectations. The company said, “The pandemic has created unusual choppiness in our growth and distorts year-over-year comparisons as acquisition and engagement per member household spiked in the early months of COVID… retention continues to be strong and better than pre-COVID Q2’19 levels, even as average revenue per membership has grown 8% over this two-year period.” and added, “Some years we’ll be a little over (like in 2020), some years a little under (like in 2021).” Prompted by the lower subscriber growth, the company aims to diversify into video games similar to its expansion in original films, animation and unscripted TV. The company had reported strong earnings in 4Q2020 and in 1Q2021 though it missed the subscriber growth expectations in Q1. The strong earnings prompted the rating agencies to upgrade the streaming company. S&P upgraded it to BB+ in January and Moody’s upgraded it to Ba1 in April this year.
Netflix’s 5.75% 2024s were up 0.21 at 112.02 while its 3.625% 2030s were down 0.18 at 120.38.
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