Netflix Q2 earnings miss expectations as competition increases from Apple, Amazon, and TikTok

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Netflix reported its Q2 2020 earnings today, missing analyst expectations and providing weaker-than-expected guidance for the third quarter. Netflix cited a few reasons for the slower growth, including continued competition from Amazon and Apple, competition from TikTok, and effects of the COVID-19 pandemic.

CNBC details Netflix’s actual numbers for the quarter, compared to analyst expectations:

  • Earnings per share (EPS): $1.59 vs. $1.81 expected, according to Refinitiv survey of analysts
  • Revenue: $6.15 billion vs. $6.08 billion, according to Refinitiv
  • Global paid net subscriber additions: 10.09 million vs. 8.26 million expected, according to FactSet

Netflix’s guidance for the third quarter of the year came in at $6.33 billion in revenue and earnings-per-share of $2.09, compared to analyst expectations of $6.40 billion and $2.01, respectively. Netflix expects 2.5 million net subscriber additions for Q3, compared to analyst expectations of 5.27 million.

In Netflix’s earnings release, the company explained that growth is slowing as COVID-19 restrictions begin to ease:

Growth is slowing as consumers get through the initial shock of COVID and social restrictions. Our paid net additions for the month of June also included the subscriptions we cancelled for the small percentage of members who had not used the service recently.

The company also cited continued competition from “two of the most valuable companies in the world,” alongside new competition from TikTok:

All of the major entertainment companies like WarnerMedia, Disney, and NBCUniversal are pushing their own streaming services and two of the most valuable companies in the world, Apple and Amazon, are growing their investment in premium content. In addition, TikTok’s growth is astounding, showing the fluidity of internet entertainment.

Going forward, Netflix says it is confident in its strategy of focusing on improving content and service every quarter:

Instead of worrying about all these competitors, we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers. Our continued strong growth is a testament to this approach and the size of the entertainment market.

Apple does not provide detailed subscriber numbers for Apple TV+, but a recent report suggested that the service beat its viewership records following last week’s release of the Tom Hanks film Greyhound. In fact, 30% of Greyhound viewers were new subscribers to the Apple TV+ service, the report said.

You can read Netflix’s full Q2 2020 earnings release here.

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