Netflix crushed its subscriber growth targets for Q2 but the stock crashed over 10% after weak Q3 guidance

• Netflix on Thursday smashed Wall Street expectations for subscriber growth during its second quarter, but forecasted slim gains in the third quarter, as it expects the impact of the coronavirus pandemic and stay-at-home orders to fade.
• The streaming company added 10.1 million paid streaming subscribers during the second quarter, and forecasted 2.5 million additions for the third quarter.
• Shares of Netflix fell as much as 12% in after-hours trading following the news.
• In a major move, Netflix also appointed its longtime content chief — the architect of its originals strategy — Ted Sarandos as co-CEO, alongside existing CEO and cofounder Reed Hastings.

Netflix on Thursday smashed Wall Street expectations for subscriber growth during its second quarter, but forecasted slim gains in the third quarter, as its anticipates the impact of the coronavirus pandemic and stay-at-home orders to fade.

The streaming-video company added 10.1 million paid streaming subscribers in the second quarter, compared with the 8.3 million Wall Street was expecting.

In the third quarter, Netflix forecasts it will add just 2.5 million paying members, well below the 6.8 million it brought in a year earlier.

Shares of Netflix were down 12% in after-hours trading on the news.

In April, Netflix posted the biggest quarterly subscriber bump in its history as people spent more time at home amid the coronavirus pandemic. The company's stock had been riding high since then, closing at a peak of $548.73 on July 10.

Netflix beat Wall Street's estimates for three of the four global regions it breaks outs, with the exception of the Europe, Middle East, and Africa region.

The company's revenue rose 25% year over year to $6.15 billion during the second quarter, beating Wall Street estimates. But Netflix missed on profit, reporting earnings of $1.59 per share.

In a major move, Netflix also appointed its longtime content chief — the architect of its originals strategy — Ted Sarandos as co-CEO, alongside existing CEO and cofounder Reed Hastings.

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

The pandemic slowed down production globally, but you wouldn't yet know it from Netflix's release slate under Sarandos.

The streamer released in the second-quarter originals like the film "Extraction," which it says is its most popular movie ever, and series like "Too Hot to Handle," "#BlackAF," "Space Force," and new seasons of "Money Heist" and "The Politician."

Netflix previously said it had finished filming most of its programming for 2020 before the pandemic paused productions.

The company also said in its letter to shareholders on Thursday that it expects to break even on free cash flow this year or even be free cash flow positive, thanks to the production stoppages. It was an area of the balance sheet Netflix had been working to strengthen amid rising content costs. The company previously forecasted free cash flow would be -$1 billion or better this year, after ballooning to -$3.3 billion in 2019. That said, Netflix said to expect free cash flow to dip into the red again next year.

Here were the key numbers from Netflix's Q2 earnings:

• Q2 revenue: $6.15 billion, versus Wall Street estimates of $6.09 billion and Netflix's forecast of $6.05 billion.
• Q2 earnings per share (GAAP): $1.59, versus Wall Street estimates of $1.82 and Netflix's forecast of $1.81.
• Q2 global paid subscriber growth (paid net additions): 10.09 million, versus Wall Street estimates of 8.27 million and Netflix's forecast of 7.5 million.
  
  • 2.94 million in the US and Canada region, versus Wall Street estimates of 983,530.
  • 2.75 million in the Europe, Middle East, and Africa region, versus Wall Street estimates of 3.30 million.
  • 1.75 million in the Latin America region, versus Wall Street estimates of 1.61 million.
  • 2.66 million in the Asia-Pacific region, versus Wall Street estimates of 2.44 million.
• Q3 global paid subscriber growth estimate (paid net additions estimate): 2.5 million, versus Wall Street estimates of 5.25 million.