Netflix adds 10.1 million paid users in Q2 2020, yet stock plunges more than 9%

The world’s largest streaming company, Netflix, recorded an impressive result recently, showing that it added 10.1 million users. However, stock traders became worried as the company couldn’t guarantee the performance recorded in Q2 2020, for the next quarter, making the stock to plunge by more than 9% after the results were released.

“Netflix added 10.1 million paid memberships versus 2.7 million in last year’s Q2. It’s a pace that cannot be kept,” Netflix CEO Reed Hastings pointed out in his shareholders’ letter. “The positive variance relative to our 7.5m forecast was due to better-than-forecast acquisition and retention.”

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“In the first half of this year, we’ve added 26 [million] paid memberships, nearly on par with the 28 [million] we achieved in all of 2019. However, as we expected … growth is slowing as consumers get through the initial shock of COVID-19 and social restrictions.

“Our paid net additions for the month of June also included the subscriptions we canceled for the small percentage of members who had not used the service recently,” Hastings added.

Netflix’s revenue grew by 25% over the same quarter in 2019, while quarterly operating income exceeded $1 billion.

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Quick fact: Netflix is an American streaming company that allows subscribers to watch movies, documentaries, different popular TV shows, and many more through internet-connected hardwires.

Operating margin expanded by an unheard-of 770 basis points year over year to 22.1 percent. Content and marketing expenses dropped lower than expected, with the COVID-19 pandemic delaying some production expenses.

“Everyone is wrestling with implications both on health, on hunger, poverty, and we too are really unsure of what the future brings,” said Hastings on the company’s earnings call Thursday.

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Hastings says the platform is making its contribution to make home confinement a little more bearable in these difficult times and it is focused on getting its content out to the subscribers.