Netflix subscriber outlook falls short; Sarandos Is named co-CEO

Netflix Inc. named Chief Content Officer Ted Sarandos as its co-chief executive, joining Reed Hastings in the top post at the video-streaming giant. The shares fell after the company’s forecast for third-quarter subscriber growth missed Wall Street estimates, suggesting the pandemic-fueled bounce in home viewing has been short-lived.

-The world’s largest paid streaming service expects to sign up 2.5 million new subscribers this period, compared with the more than 5 million expected on Wall Street after two quarters of torrid pandemic-fueled customer growth. Netflix signed up 10.1 million new paid customers in the second period, beating Wall Street’s average estimate of 8.27 million.

Key Insights

-The change at the top and the muted outlook could lead to investor anxiety. The forecast raises concern that the record-breaking start to Netflix’s year -- fueled by viewers stuck at home because of Covid-19 -- will limit growth moving forward. The company finished the second quarter with almost 193 million subscribers.

-The streaming service has released more than 30 pictures since mid-March, and has had particular success with star-driven action films like “Extraction” and “The Old Guard.” “Extraction,” starring Chris Hemsworth, delivered the biggest audience of any Netflix original movie in its first four weeks.

-On a regional basis, the U.S./Canada market led with 2.94 million new customers. Europe, the Middle East and Africa market added 2.75 million, bringing the total there to 61.5 million. Netflix added 2.66 million customers in Asia and 1.75 million in Latin America.

-Second-quarter revenue rose to $6.15 billion, beating the average of analysts’ forecasts. Earnings increased to $1.59 a share, missing estimates.

Market Reaction

-Netflix shares fell as much as 15% to $449.65 in after-market trading. The company has been one of the hottest stocks of the year, up more than 60% to boost its market value past $230 billion.

Written by Lucas Shaw.