Netflix earnings in Q2 mixed despite password crackdown, ad tier rollout

On Wednesday, Netflix reported second-quarter financial results that came in mixed as the platform continues efforts to trim costs and boost engagement in an increasingly competitive streaming landscape.

Revenue, although 2.7% higher compared to the year-ago period, missed estimates despite new initiatives like the crackdown on password sharing, which rolled out in the US in late May, along with the recently launched ad-supported tier.

The streamer also guided to third-quarter revenue of $8.52 billion, below expectations of $8.67 billion.

Shares dipped lower as a result, sinking as much as 5% in after-hours trading.

Revenue: $8.19 billion versus $8.30 billion expected

Adjusted earnings per share (EPS): $3.29 versus $2.90 expected

Subscribers: 5.89 million net additions versus 2.1 million net additions expected

Despite the revenue miss, profitability metrics like operating margin and free cash flow steadily beat expectations. Operating margin hit 22.3% in the quarter, surpassing Netflix’s own projection of 19%. The company reiterated its full-year operating margin guidance of 18% to 20%.