Netflix (NASDAQ:NFLX)
After-hours trading for Netflix stock was down 3.9% after the company reported a quarterly revenue shortfall despite higher-than-expected earnings and new subscriber growth.
In addition, in the second quarter, Netflix (NASDAQ:NFLX) announced the “broad rollout” of its paid-sharing campaign, better known as the password-sharing crackdown. The firm said, “During the first quarter, we launched paid sharing in four countries and are pleased with the results.”
And in light of the “healthy performance and trajectory” of its advertising strategy — “particularly in the U.S.” — the company is “upgrading our ads experience with more streams and improved video quality to attract a broader range of consumers.”
Revenues increased by 3.7% year-over-year to $8.16 billion, which was extremely close to missing the average estimate of analysts. (The corporation highlighted that they expanded by 8% regardless of the impact of currency exchange rates.)
The average number of paid memberships exceeded projections; they increased by 4%, with 1.75 million net additions, although analysts expected only 1.38 million. The average income per member decreased by 1% (although it increased by 4% on a currency-neutral basis).
Netflix stock blames the dollar’s strength for the decrease in its operating income, which went from $2.0 billion to $1.7 billion the previous year, and its operating margin, which decreased from 25% to 21%.
Notably, after the company decided to diversify its revenue towards advertising, Netflix discontinued the practice of forecasting quarterly user counts. As a result of moving the paid-sharing wide rollout from late Q1 to the second quarter of 2018, it is anticipating revenue of $8.2 billion for the second quarter of 2018, which is lower than the consensus estimate of $8.47 billion. It is noted that this move will cause certain projected growth and revenue advantages to slip into the third quarter rather than the second quarter.
Additionally, it forecasts a broadly stable operating income for the second quarter of $1.6 billion, with an operating margin that ticks down to 19% from 20% a year earlier (mostly owing to the dollar strengthening).
The earnings-related executive video chat that will be conducted by the firm and moderated by BofA analyst Jessica Reif Ehrlich will go live at six o’clock p.m. Eastern Time (ET).
Featured Image: Unsplash @ Souvik Banerjee
