Netflix membership sees ‘better than expected’ decline, slowest annual revenue growth in a decade

Netflix (Nasdaq:NFLX) announced financial and operating results for the second quarter of 2022 on Tuesday. The company saw its membership numbers halve and recorded a loss of 1.0 million users in the quarter – deeming the quarter “better than expected”. on subscriber “growth”.

The company posted a loss of 200,000 subscribers in the first quarter of 2022, its first decline in subscribers in more than 10 years, from its expected 2.5 million subscriber net additions. The company attributes the drop to the suspension of its service in Russia and the end of all Russian paid subscriptions.

Now in Q2 2022, the streaming platform registered 220.7 million users for the quarter and expects the numbers to pick up to 221.7 million in Q3 2022, guiding towards 1.0 million net additions . This is an improvement from the company’s previous forecast that it will lose 2.0 million net subscribers in this quarter.

Breaking down the number of company subscribers, Netflix recorded a loss of 1.3 million net subscribers in the UCAN market and 0.8 million net subscribers in the EMEA markets. This was offset by 1.1 million net additions in the APAC region.

Financially, the company posted revenue of $7.97 billion, an increase from $7.87 billion in the first quarter of 2022 and $7.34 billion in the second quarter of 2021. This is below street estimates of US$8.04 billion.

While the company touted the quarterly figure to be 8.6% year-over-year growth, it’s actually the company’s slowest annual growth in nearly a decade.

Source: Hypergraphics

The streaming platform is also guiding its third-quarter 2022 revenue decline, ending at $7.84 billion.

Lower, the company reported quarterly operating profit of $1.58 billion, down from both $1.97 billion in the first quarter of 2022 and $1.85 billion in the second quarter. 2021. For the third quarter, the firm forecasts a further decline to $1.26 billion, or an operating margin of 16%.

Net income was US$1.44 billion, down from US$1.60 billion last quarter, but up from US$1.35 billion a year ago . The company also forecasts a further decline in net income, expecting net income to end in the third quarter of 2022 below the US$1 billion mark at US$0.96 billion.

Quarterly earnings translate to diluted earnings of $3.20 per share, beating consensus of $2.94. For the next quarter, the company expects this to drop further to US$2.14.

Taking financial items into account, adjusted EBITDA decreased to US$1.81 billion for the quarter, compared to US$2.17 billion in the previous quarter.

The company generated net cash from operating activities of $102.8 million, down from $922.8 million generated last quarter. This leads to a cash balance of US$5.84 billion, bringing the current asset balance to US$7.84 billion. Current liabilities, meanwhile, ended at US$7.50 billion.

Despite the dwindling base of paying members, the company touted its victory over television viewership.

“Although we can always improve, we are very satisfied with how far we have come to offer so much satisfaction and pleasure to our members. For example, in the United States, which is one of the most competitive markets in the world, we attracted more television viewing time than any other outlet during the 2021-22 television season,” the company said in its statement.

The streaming platform, which is striving to increase its revenue streams from its membership base, has also laid bare what areas it will focus on in the short term. This includes plans to offer an ad-based tier, which he says will complement his “existing plans” to remain ad-free.

“Our global MRA grew at a compound annual rate of 5% from 2013 to 2021, so it makes sense now to give consumers the choice of a cheaper option with ads, if they so choose,” the company said. society.

The company recently announced its planned partnership with Microsoft to deliver the ad-based subscription offering.

The tech giant also said it plans to “monetize the more than 100 million households currently enjoying” the streaming platform through password sharing. The company said it was considering implementing a paid sharing system, seen as a tiered subscription where additional users on the same account might have to pay.

“We know this will be a game changer for our members…Our goal is to find an easy-to-use paid sharing offering that we believe works for our members and our business that we can roll out in 2023,” added the society.

Netflix last traded at US$201.63 on the Nasdaq.


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