Arnold Schwarzenegger in Netflix's "Arnold"

Netflix added nearly 6 million subscribers in the launch quarter to crackdown on password sharing in the US

Netflix added 5.89 million global subscribers in the second quarter of 2023, much better than Wall Street expected. (Media analyst consensus ranged from about +1.8 million caps to +2.2 million, give or take.) The company now has 238.39 million caps overall.

Even much better than expected? Second quarter profit. On a per share basis, quarterly earnings were $3.29; analysts had expected $2.86. Overall net income was $1.488 billion.

While the growth translated into profit, it didn’t deliver a revenue win. Netflix’s $8.187 billion in revenue from April to June fell short of Wall Street’s $8.3 billion consensus estimate, which explains why the stock (NFLX) is declining in after-hours trading. Netflix forecasts an even higher profit, $1.58 billion, for the summer quarter.

Netflix’s free cash flow fell from $2.117 billion in the first quarter to $1.339 billion in the June quarter. No problem, executives touted in Wednesday’s shareholder letter; with the WGA and SAG-AFTRA strikes, reduced content spending is inevitable.

April-June 2023 was quite a busy time for the king of streaming. The biggest thing that happened was the introduction of “paid sharing” — what Netflix calls its crackdown on password sharing — in the US (and about 100 other countries). The revenue from the additional subscriptions has yet to be materially realized, the company said.

Towards the end of the quarter, Netflix also revamped the way it reports viewers, shaking up the company’s “most popular” rankings in the process.

Netflix had a few hits during the three-month period, though only one of them made the Top 10 of all time. As for movies, Jennifer Lopez’s “The Mother” and Chris Hemsworth’s vehicle “Extraction 2” were the standout outings; “The Mother” is now Netflix’s ninth most-watched movie ever. In the series, which is Netflix’s bread and butter, the “Bridgerton” spinoff “Queen Charlotte” was the big release in the second quarter.

“Although we have made steady progress this year, we still have a lot of work to do to re-accelerate our growth,” Netflix wrote in its Wednesday letter to shareholders. “We remain focused on: creating a steady pace of must-see shows and movies; improve monetization; increase the enjoyment of our games; and investing to improve our member service.

Other than that, it was actually quite challenging day, news-wise, already for Netflix. This morning, the streamer removed its cheaper ad-free tier as an option for new or expired subscribers in the US and UK. The scrapped “Basic” plan bills $9.99 a month, which left revenue on the table. These days, every dollar counts.

A video interview with Netflix co-CEOs Ted Sarandos and Greg Peters and CFO Spence Neumann, moderated by BofA Securities’ Jessica Reif Ehrlich, will be available on YouTube at 3 PM PT.