Netflix has released its Q2 2022 financial results, and things aren’t as gloomy as the streamer had originally predicted.
In its letter to shareholders, Netflix revealed that it had lost around 970,000 subscribers during the second quarter. This isn’t something that would normally be worth celebrating, but it’s being regarded as a win by some investors, as the streamer had previously projected much higher losses in the realm of 2 million.
Netflix described its membership growth as being “better than expected” in the opening of its letter, confirming solid Y/Y revenue growth, although not as great as previous quarters, along with a commitment to shareholders about how it’ll continue to improve its business.
Q2 was better-than-expected on membership growth, and foreign exchange was worse-than-expected (stronger US dollar), resulting in 9% revenue growth (13% constant currency). 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. We’re in a position of strength given our $30 billion-plus in revenue, $6 billion in operating profit last year, growing free cash flow and a strong balance sheet.
Netflix goes on to confirm that it will be launching a new ad-supported tier of its streaming service relatively soon, which is no longer a surprise to those who have kept up with recent announcements, including those involving Microsoft. The new ad-supported tier is slated to launch early next year, according to a portion of the letter that explains why Netflix decided to collaborate with the Windows maker.
We recently announced Microsoft as our technology and sales partner and we’re targeting to launch this tier around the early part of 2023. They are investing heavily to expand their multi-billion advertising business into premium television video, and we are thrilled to be working with such a strong global partner. We’re excited by the opportunity given the combination of our very engaged audience and high quality content, which we think will attract premium CPMs from brand advertisers.
Netflix currently has 220.67 million subscribers, and it expects to add around one million in the third quarter.
One of the ways that Netflix plans to grow its revenue and reduce password sharing is with new paid sharing plans. Already active in certain regions in Latin America, these plans allow subscribers to add extra members to their accounts for a small additional premium per month, something that Netflix hopes will allow it to better “monetize the 100m+ households that are currently enjoying, but not directly paying for” its streaming service.