This archive report was first published on 18 July 2020.
On July 18, 2020, Netflix shares took a hit after the company reported a profit of $720 million on revenue of $6.1 billion in the recently ended quarter, compared to $709 million profit on $5.8 billion in revenue during the first three months of the year.
Despite a 10.1 million increase in paid memberships to about 193 million total, Wall Street analysts had expected stronger profit, especially as people turned to the service for entertainment during the coronavirus pandemic.
Netflix warned that growth could cool since sheltering-in-place likely meant people rushed to join in the early months of the pandemic as lockdowns began, instead of spreading out over the year.
Shares quickly dove more than 10 percent in after-market trades that followed release of the earnings figures but regained a bit of the loss.
Wedbush analyst Daniel Ives described the share stumble as a “near-term speed bump” due to overly exuberant expectations.
“Streaming growth is seeing a bonanza in this COVID environment,” Ives said.
Netflix said in a letter to shareholders that while its slate of original shows for this year is on track, it is focused on safely getting production back up and running.
“As the world slowly re-opens, our main business priority is to restart our productions safely and in a manner consistent with local health and safety standards to ensure that our members can enjoy a diverse range of high quality new content,” executives said in the letter.
Netflix is facing increased competition from tech giants such as Apple and Amazon, along with entertainment titans including Disney, NBCUniversal and WarnerMedia.
Chief content officer Ted Sarandos was appointed a co-chief executive and elected to a seat on the Netflix board, while Greg Peters will be chief operating officer as well as chief product officer.
Chief executive Reed Hastings said in a release detailing the executive changes, “In terms of the day-to-day running of Netflix, I do not expect much to change.”
