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Netflix shocks Wall Street with earnings miss, weak 3rd quarter guidance

16 July 2020
Dan Ackermann

Netflix's stock was down more than 12% in after-hours trading on Thursday after the entertainment giant said it missed analyst expectations on earnings-per-share and added fewer subscribers than expected during the second quarter.

Why it matters: Netflix was supposed to be a safe bet for investors this quarter. Third-party measurement companies like Nielsen and Parrot Analytics suggested throughout the quarter that the entertainment giant was pulling ahead of competitors in the U.S. in terms of consumer engagement during the pandemic.

Driving the news: Netflix also named Chief Content Officer Ted Sarandos as co-CEO of the company, alongside chief executive Reed Hastings, in its earnings release.

  • Hastings and Sarandos have worked together for many years and have known each other for over two decades.
  • Hastings said he does not anticipate that day-to-day operations at Netflix will change much.

The big picture: Executives said in a shareholder letter that growth slowed this quarter due to the easing of lockdown restrictions and the initial shock of the coronavirus pandemic wearing down. Netflix also alluded to new competition from TikTok, the short-form video app owned by Chinese company ByteDance.

  • "TikTok’s growth is astounding, showing the fluidity of internet entertainment. Instead of worrying about all these competitors, we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers," the executives wrote.
  • Be smart: Netflix has in the past suggested that any service that dominates users' time is a competitor, include Epic Games' hit video game Fortnite.

By the numbers, per CNBC:

  • Earnings per share (EPS): $1.59 vs. $1.81 expected, according to Refinitiv survey of analysts
  • Revenue: $6.15 billion vs. $6.08 billion, according to Refinitiv
  • Global paid net subscriber additions: 10.09 million vs. 8.26 million expected, according to FactSet

What's next: Netflix will hold a video Q&A presentation for investors at 6pm ET.

Go deeper: Netflix's earnings over the past year:

Transcripts show George Floyd told police "I can't breathe" over 20 times

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Newly released transcripts of bodycam footage from the Minneapolis Police Department show that George Floyd told officers he could not breathe more than 20 times in the moments leading up to his death.

Why it matters: Floyd's killing sparked a national wave of Black Lives Matter protests and an ongoing reckoning over systemic racism in the United States. The transcripts "offer one the most thorough and dramatic accounts" before Floyd's death, The New York Times writes.

The state of play: The transcripts were released as former officer Thomas Lane seeks to have the charges that he aided in Floyd's death thrown out in court, per the Times. He is one of four officers who have been charged.

  • The filings also include a 60-page transcript of an interview with Lane. He said he "felt maybe that something was going on" when asked if he believed that Floyd was having a medical emergency at the time.

What the transcripts say:

  • Floyd told the officers he was claustrophobic as they tried to get him into the squad car.
  • The transcripts also show Floyd saying, "Momma, I love you. Tell my kids I love them. I'm dead."
  • Former officer Derek Chauvin, who had his knee on Floyd's neck for over eight minutes, told Floyd, "Then stop talking, stop yelling, it takes a heck of a lot of oxygen to talk."

Read the transcripts via DocumentCloud.