Netflix beats subscriber targets but cautions on next quarter

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By Dawn Chmielewski and Lisa Richwine (Reuters) -Netflix said on Thursday it added more than 8 million subscribers in its second quarter as the streaming service benefited from a password-sharing crackdown and such titles as "Bridgerton," "Baby Reindeer" and "The Roast of Tom Brady." While the subscriber gains topped analyst predictions of 5 million, Netflix also cautioned that third-quarter subscriber gains would be lower than the comparable period in 2023 when the password-sharing crackdown had just started. Netflix also said its vice president of ad sales, Peter Naylor, was leaving the company. In a letter to investors, the company said it did not expect advertising to be a primary driver of revenue growth until at least 2026. Netflix shares fell 2% in after-hours trading to $630.06. The company reported diluted per-share earnings of $4.88, compared with consensus forecasts of $4.74 a share, according to LSEG. Revenue for the quarter reached $9.56 billion, in line with estimates. At the end of June, the new sign-ups brought the total number of global Netflix subscribers to more than 277 million. The streaming video pioneer is facing saturation in the United States and told Wall Street last quarter that it plans to stop regularly reporting new subscriber additions next year. Investors have been monitoring the growth of Netflix's ad-supported tier, which has been fueled by the company's crackdown on password-sharing, pricing increases for ad-free tiers and new consumer bundles, such as Comcast's "StreamSaver" bundle, which combines Netflix with Peacock and Apple TV+. Netflix said its ad tier membership grew 34% from the prior quarter, but it did not say how many subscribers chose that option. "Our ad business is growing nicely and is becoming a more meaningful contributor to our business," Netflix said in its letter to investors. "But building a business from scratch takes time - and coupled with the large size of our subscription revenue - we don't expect advertising to be a primary driver of our revenue growth in 2024 or 2025." The company said it expects third-quarter revenue growth of 14%, compared with a year ago. Three years into its videogame initiative, Netflix said it planned to release a multiplayer game based on "Squid Game" later this year when it debuts Season Two of the dystopian Korean series. It also plans games tied to "Emily in Paris" and "Selling Sunset." (Reporting by Dawn Chmielewski and Lisa Richwine in Los AngelesEditing by Matthew Lewis)