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Netflix is set to report its second-quarter earnings on Wednesday, and investors are eagerly awaiting updates on the streaming giant’s crackdown on password sharing and the recently launched ad-supported tier.
Analysts are predicting that Netflix’s subscriber base will see a boost from the implementation of its password sharing policy earlier this year, as data sources have indicated.
Here are the expectations for the quarter, according to Refinitiv:
- Earnings: $2.86 per share
- Revenue: $8.30 billion
In May, Netflix introduced its new sharing policy, aimed at preventing freeloaders from sharing accounts. Under this policy, members can either transfer a profile to someone outside their household and have them pay for their own account, or the account holder can pay an additional fee of $7.99 per person.
According to a report from Antenna, Netflix observed an increase in its subscriber base after the policy’s implementation. Wells Fargo and MoffettNathanson also expect to see a boost in subscriber additions.
Wells Fargo, in fact, raised its second quarter net additions estimate from 1.5 million to 2.1 million, according to analyst Steven Cahall’s note this week.
Investors will also be interested in any details Netflix provides about its recently launched cheaper, ad-supported tier. Netflix introduced both the new sharing policy and ad tier as part of its response to its first subscriber loss in over a decade in 2022.
On Wednesday, Netflix confirmed the removal of its “basic” ad-free plan, making its standard plan with ads the cheapest option at $6.99 per month. The standard and premium tiers without commercials are priced at $15.49 and $19.99 per month, respectively.
The rollout of these initiatives has contributed to the rise in Netflix’s stock, with shares climbing over 60% this year and reaching a 52-week high on Tuesday in anticipation of growth this quarter.
Media companies are turning to ad-supported streaming more frequently as a means to achieve profitability.
During its pitch to advertisers in May, Netflix provided limited details about its ad-supported tier, but it was enough to drive up its stock. The company revealed that it had 5 million active users for the new tier, and 25% of its new customers were opting for the tier in available areas.
Another point of concern during the earnings announcement will be the impact of the Hollywood writers and actors’ strikes. As the media industry grapples with one of its most tumultuous periods in years, actors have recently joined writers on the picket line, essentially shutting down Hollywood.
Netflix is expected to fare better than other media companies during the strike due to its diverse range of content, particularly from international sources.
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