Netflix added 10M subscribers in Q2 but predicts slowdown in Q3

Netflix said it added a record number of new paid subscribers in the second quarter but warned that subscriber growth will slow down in the back half of 2020.

The company added 10.1 million new paid subscribers – well ahead of the 7.5 million net additions it forecast in April and significantly higher than the 2.7 million subscribers it added in the second quarter of 2019. In the first half of the year, Netflix said it’s added 26 million paid memberships. It added 28 million new subscribers in all of 2019.

“However, as we expected… growth is slowing as consumers get through the initial shock of Covid and social restrictions. Our paid net additions for the month of June also included the subscriptions we cancelled for the small percentage of members who had not used the service recently,” the company wrote in a letter to shareholders.

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Netflix forecast 2.5 million paid net additions for the third quarter (down from the 6.8 million in the same quarter last year). The company said its strong first half growth likely pulled forward some demand from the second half of the year. Netflix will also have to go up against the positive impact of new seasons of both “Stranger Things” and “La Casa de Papel (aka Money Heist)” that debuted last year.

“We continue to view the quarter-to-quarter fluctuations in paid net adds as not that meaningful in the context of the long run adoption of internet entertainment which we believe provides us with many years of strong growth ahead,” the company wrote.

Netflix said its second-quarter revenue grew 25% year over year and its quarterly operating income exceeded $1 billion. Average streaming paid memberships in the quarter rose 25% year over year and streaming ARPU increased 0.4% year over year.

Along with its financial results Netflix also disclosed that Chief Content Officer Ted Sarandos has been named co-CEO.

“Ted has been my partner for decades. This change makes formal what was already informal -- that Ted and I share the leadership of Netflix,” said CEO Reed Hastings in a statement.