Netflix soothes Wall Street concerns with customer growth forecast

Netflix had said in April it expected to lose 2 million customers in the current quarter, shocking Wall Street and raising questions about its long-term prospects.

Defections for the second quarter were not as steep as expected, and Netflix estimated its new customer additions for July through September would amount to 1 million. Wall Street analysts were expecting 1.84 million, according to analysts polled by Refinitiv.

"The stock is up because (analyst) downgrades all made a big deal out of slowing growth," Wedbush Securities analyst Michael Pachter said, noting that Netflix was cutting costs and expected free cash flow to grow substantially next year.

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Shares of other streaming companies rose slightly after the Netflix report. Roku Inc stock gained 2.7 percent while Walt Disney Co and Paramount Global were up about 1 percent.

After years of red-hot growth, Netflix's fortunes changed as rivals including Disney, Warner Bros Discovery and Apple Inc invest heavily in their own streaming services.

In a letter to shareholders on Tuesday, Netflix said it had further examined the recent slowdown, which it had attributed to a variety of factors including password-sharing, competition and a sluggish economy.

"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," the letter said.

One way it plans to earn more from members is by cracking down on password-sharing. The company is testing two options in Latin America.

Netflix remains the dominant streaming service around the world with nearly 221 million global paid subscribers. The company also is working to build on the popularity of the megahit series "Stranger Things" and seeking to turn some of its biggest successes into franchises.

Also Read | ‘Stranger Things’ sets streaming record with over 7 billion minutes of viewing in a week

For April through June, earnings per share came in at $3.20, ahead of the Wall Street consensus of $2.94.

Netflix said the strong US Dollar hit revenue, which grew 9 percent to $7.97 billion, below analyst estimates of $8.04 billion. Revenue would have increased by 13 percent without the foreign exchange impact, the company said.

Last week, Netflix announced Microsoft Corp as its technology and sales partner for the ad-supported offering.