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Netflix shares drop after Q2 guidance spooks markets
Netflix narrowed full-year revenue guidance to $51.0 billion to $51.4 billion and its Q3 revenue outlook of $12.86 billion missed Street estimates.
Netflix shares fell sharply on July 17 after markets reacted negatively to the company’s second-quarter results, despite earnings broadly matching expectations, with investors focusing on weaker third-quarter guidance. In its Q2 release, Netflix narrowed its annual revenue guidance to a range of $51 billion to $51.4 billion, raising the lower end by $300 million while cutting the top end by a similar amount. The company also issued Q3 revenue guidance of $12.86 billion, which was reported as falling short of Street estimates. Netflix also said it would reduce the frequency of its “What We Watched” engagement report from biannual to annual, a change that comes amid concerns over a potential dip in engagement. While the company said hours per member have decreased, it added that engagement remains “healthy.” During the Q2 earnings call, Co-CEO Greg Peters said there is not a linear relationship between view hours and revenue and profit because not all viewing hours are created equal, pointing in particular to live events as having a lower watch time per unit of content spend, while still helping drive customer acquisition. The article also notes Netflix scaled back reporting subscription metrics, including stopping quarterly guidance for the metric in 2023 and moving to updates only when subscriber milestones are reached starting in Q1 2025.