Leading content streaming service Netflix has added 10.1 million new paid subscribers as people stayed home, as the company reported net earnings of $720 million over $6.15 billion in revenue for its second quarter (April-June period).
However, the shares declined nearly 9 per cent in after-hours trading on fears of slow growth in the rest of the year, reports MarketWatch.
The company also promoted Ted Sarandos from chief content officer as co-CEO who will share the top spot with co-founder Reed Hastings.
Sarandos will retain his current role and join the board, Netflix said in a letter to shareholders on Thursday.
The stock nosedived after Netflix provided third-quarter revenue guidance of $6.33 billion, below the Wall Street estimates of $6.40 billion.
Netflix expects 2.5 million net subscriber additions for the third quarter, while analysts were expecting 5.27 million.
“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 said in the shareholder letter.
Netflix said that “current infection trends create more uncertainty for our productions in the US. Parts of the world like India and some of Latin America are also more challenging and we are hoping to restart later in the year in these regions”.
The company, however, forecasts to see a 16 per cent operating margin for 2020 and 19 per cent for 2021.
“This is a great growth opportunity for us, so any revenue upside we would tend to put into more content for our members, which tends to generate more growth over time,” said Hastings.
Netflix currently has 193 million paid memberships in over 190 countries.
Netflix now counts short-video making app TikTok among its rivals.
“TikTok’s growth is astounding, showing the fluidity of internet entertainment,” the company wrote to shareholders.