Netflix added just 1.54 million new paid subscribers during the second quarter, ahead of its guidance but still one of the slowest growth quarters of the past decade for the streaming giant.
The company said the APAC region represented about two-thirds of its global paid net adds in the quarter and that, as expected, second-quarter paid memberships in the U.S. and Canada declined by 400,000.
“We believe our large membership base in UCAN coupled with a seasonally smaller quarter for acquisition is the main reason for this dynamic,” the company wrote in a letter to shareholders. During the second quarter of 2019, Netflix’s UCAN paid net adds declined by 100,000 but have grown by nearly 7.5 million since.
For the third quarter of 2021, Netflix is forecasting paid net additions of 3.5 million, compared to 2.2 million net additions in the same quarter last year. If that forecast holds true, Netflix will have added more than 54 million paid net adds over the past 24 months. The company now has approximately 209 million total paid memberships.
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“The pandemic has created unusual choppiness in our growth and distorts year-over-year comparisons as acquisition and engagement per member household spiked in the early months of COVID,” the company wrote. “In Q2’21, our engagement per member household was, as expected, down vs. those unprecedented levels but was still up 17% compared with a more comparable Q2’19.”
Despite an apparent subscriber growth slowdown, Netflix revenue grew 19% to $7.34 billion, which the company attributed to an 11% increase in average paid streaming memberships and 8% growth in average revenue per membership. Operating income rose 36% year over year to $1.8 billion. The company is forecasting 16.2% growth for revenue in the third quarter but expects operating margin will slip back to year-ago levels. Netflix said it is still targeting a 20% operating margin for the full year, compared to 18% in 2020.