Netflix Posts Better-Than-Expected 970,000 Q2 Sub Loss

Netflix July 19 announced it lost just 970,000 subscribers globally in the second quarter (ended June 30), less than half the 2 million net subscriber loss the streamer had expected.

Netflix finished the second quarter with 220.6 million subscribers worldwide. The streamer now expects to add 1 million net subs in the current third quarter (ending Sept. 30). It added 4.4 million subs in the year-ago period.

“Q2 was better-than-expected on membership growth,” co-CEOs Reed Hastings and Ted Sarandos, and CFO Spence Neumann wrote in the shareholder letter. “Our challenge and opportunity is to accelerate our revenue and membership growth by continuing to improve our product, content, and marketing as we’ve done for the last 25 years, and to better monetize our big audience.”

Across Netflix market regions, the streamer lost 640,000 net subs in the U.S. and Canada to finish the quarter with 74.58 million. It lost 300,000 subs in the Middle East, Europe and Africa to end the period with 73.73 million. Netflix lost 350,000 subs in Latin America where it is now charging select subs a surcharge to allow friends to access the streamer. Netflix ended the period with 39.61 million subs.

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Finally, Netflix’s subscription ace remains the Asia Pacific region, which added 1.09 million net subs to end the period with 33.72 million. The region is home to Netflix biggest global content hit: South Korea’s Squid Game, which has been greenlighted for a second season.

Notably, following the first quarter’s subscriber growth misstep, Netflix adjusted its cost structure base on the current rate of revenue growth. This resulted in hundreds of staffing cuts and office lease reductions, resulting in approximately $70 million of severance costs and an $80 million non-cash impairment of certain real estate leases.

Excluding these items totaling $150 million, and the foreign exchange impact of the stronger U.S. dollar since the Q1 fiscal result, Netflix’s operating profit ($1.62 billion) and operating margin (19.8%) were slightly ahead of the company’s guidance forecast.

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