Netflix (NASDAQ:NFLX) likely saw the fewest new subscribers in five quarters during April-June, as sharp gains from its crackdown on password sharing slowed and viewer attention shifted to summer sporting events like the Euro soccer tournament.
The company added an estimated 4.82 million subscribers in the second quarter, according to LSEG data. This would mark the lowest additions since Q1 2023, and about half of the 9.3 million added in the previous quarter.
Despite the slowdown in subscriber growth, Netflix’s efforts to promote its lower-priced, ad-supported tier have yielded significant ad revenue growth. The company’s ad revenue is expected to have more than doubled in the June quarter.
Overall revenue likely increased by 16.4% to $9.53 billion, marking the fastest growth since Q2 2021.
Popular Content and Netflix’s Financial Performance
Netflix’s original shows, such as the historical romance “Bridgerton” and the limited series “Baby Reindeer” — based on comedian Richard Gadd’s experience with a stalker — topped most-watched charts in Q2, according to Nielsen data.
As Netflix prepares to report its second-quarter results on Thursday, investors will closely examine the company’s efforts to expand its ad-supported plan and look for updates on new growth drivers.
In May, Netflix announced that its ad-supported tier had reached 40 million monthly active users worldwide and accounted for 40% of all sign-ups in available countries, up from 23 million in January.
The push for ad-supported subscriptions has resonated with investors. Netflix’s stock is up nearly 35% for the year, compared to a return of about 19% on the S&P 500 index.
Seasonal Viewership Trends and Competitive Landscape
Netflix and its rivals, such as Disney+, typically experience a dip in viewership during the summer months as people travel. This year, the Olympic Games, beginning on July 26, are also expected to divert some viewers from Netflix, according to analysts.
After heavily investing in original content, brokerage MoffettNathanson noted that Netflix is also successfully driving viewership with competitors’ content. Eighteen of the top 20 streamed titles were acquired shows, such as “NCIS” and “Grey’s Anatomy.”
Strategic Partnerships and Live Content
Netflix has announced several bundling partnerships. Comcast is offering Netflix with its Peacock streaming service and Apple TV+ for its Xfinity internet and TV customers.
The company is also hosting more live content, including a deal to stream two National Football League games on Christmas Day, to create advertiser-friendly events.
“More live-event announcements will follow as the company looks to improve its ad-supported time spent amid an industry-wide reduction in scripted content production,” said Ross Benes, senior analyst at Emarketer.
Future Growth and Advertising Technology
To drive the next phase of growth, Netflix announced plans in May to build an in-house ad technology platform, which will offer marketers more ways to buy commercials and measure their performance. Initially, Netflix leaned on Microsoft to build the backbone of the ad tier.
“Despite this progress, we continue to view advertising as a longer-term story and do not expect a material revenue contribution until 2025,” said Jessica Reif Ehrlich, an analyst at BofA Global Research, in a note on Monday.
Featured Image: Wikipedia
Author Stephanie Bédard-Châteauneuf 
