Netflix announced that it anticipates yearly free cash flow of about $5 billion as its subscription increased by 8 percent during the second quarter.
Netflix Inc (NASDAQ: NFLX) shares dropped as much as 8.3 percent during Wednesday’s after-hours session to trade around $438. The $211 billion valued video streaming company announced its second-quarter earnings on July 19, which although depicted better than expected earnings showed a struggling company to fight the password-sharing challenge. For Q2 2023, Netflix revealed earnings per share of $3.29 compared to $2.86 expected by analysts surveyed by Refinitiv. Additionally, the company announced a revenue of about $8.2 billion compared to the $8.3 billion forecast by analysts surveyed by Refinitiv.
Netflix in Q2 2023
According to a letter sent to Netflix shareholders, the company announced an operating profit of about $1.8 billion and expects revenue growth to accelerate during the second quarter. Furthermore, revenue during the second quarter grew by about 3 percent YoY fueled by a 6 percent increment in paid membership. During the second quarter, the company successfully launched paid sharing in more than 100 countries, which represents over 80 percent of its revenue base.
The company is, however, still facing stiff competition from other video streaming platforms like YouTube, Amazon Prime Video, Hulu, and Disney+, among others. Nonetheless, the company continued to invest in content creation to give subscribers value for money.
“Long-term success takes strength in both entertainment and technology, a combination that’s not been required of large media or tech companies in the past. It’s about one’s ability to work with the best creators; to produce and license movies, TV shows, and ultimately games across multiple genres and languages globally,” the company noted.
Notably, the company ended the second quarter with a gross debt of about $14.5 billion, which was in line with the company’s target of about $10B -$15B. In its $5 billion share buyback program, Netflix repurchased 1.8 million NFLX shares worth about $645 million during the second quarter. With Netflix running above its targeted minimum cash level, the company announced that the share buyback program will accelerate during the second half of the year.
The share repurchase program has helped Netflix shares gain about 62 percent YTD and also maintain a bullish outlook. Moreover, 43 analysts have given Netflix shares an average rating of Over despite rallying 120 percent in the last year.
For the third quarter, the company expects revenue of $8.5B, up 7 percent year over year. The company announced that it has widened its coverage on ad-sharing plans. As a result, Netflix expects its fourth-quarter earnings to come in even better than the third quarter.