The market is selling off Netflix shares after quarterly results!

Video Streaming Pioneer, Netflix, disappointed Wall Street on Wednesday with second-quarter revenue that fell short of analyst estimates, sending shares down more than 8% in aftermarket trading.

Expected improvement in monetization

Revenue data, along with weaker-than-expected third-quarter revenue forecast, dwarfed the addition of 5,9 million new customers using the streaming service from April to June and profits that easily exceeded forecasts.

Netflix has been looking for new ways to make money for some time now as streaming competition intensifies and the market is approaching saturation in United States. The company introduced a cheaper advertising option in November last year and began asking account sharing customers for payment as part of a wide-ranging campaign that began in May.

The company said it expected accelerating revenue growth in the second half of the year, adding that it aims to continue creating compelling shows and movies, improve monetization, grow its video game business, and improve the overall user experience.

"While we have made steady progress this year, we still have more work to do to accelerate our growth again" the company wrote in its quarterly letter to shareholders.

The company reported dilution earnings per share of $3,29 for the second quarter, beating the consensus forecast of analysts surveyed by Refinitiv at $2,86.

New account registration records

Nearly 6 million new subscribers surpassed Wall Street's expected 1,9 million. At the end of June Netflix had a total of 238,4 million subscribers globally.

Quarterly revenue was up 2,7% year-on-year to $8,2 billion, below forecasts of $8,3 billion. The company estimated third-quarter revenue to be $8,5 billion. Wall Street projected $8,7 billion.

While the company added subscribers, it said average revenue per member was down 3% from the previous year. This was partly because many new signups were in countries where Netflix charges less.

The company also said its advertising level remained a small part of its member base, and current advertising revenue is not significant.

Strike in Hollywood

Finally, it is worth mentioning that, like its competitors, Netflix is ​​struggling with strikes by thousands of Hollywood actors, directors and writers. Labor action forced many film and television productions to shut downa, although specialists say that Netflix has an advantage due to its global production.

As such, Netflix has raised its 2023 free cash flow estimate to $5 billion, partly because it will be spending less on content with closed productions.

Netflix co-founder Ted Sarandos, who noted he grew up in a union home and recalled the difficulties of his father's strike, said he hoped labor tensions would be resolved soon.

Netflix shares clearly fell shortly after the publication of quarterly results. Investors reacted particularly pessimistically to lowered earnings forecasts for Q3 (USD 8,5 billion in revenues vs. expected USD 8,7 billion).