Netflix’s Earnings Top Expectations as Subscribers Surge

Netflix (NFLX) posted better-than-expected results for the second quarter as subscribers surged, though the streaming giant issued soft guidance for the third quarter.

The company reported second-quarter revenue of $9.56 billion, up 16.8% year-over-year, and above analysts’ estimates. Net income of $2.15 billion or $4.88 per share fell from the prior quarter but improved from $1.49 billion or $3.29 per share a year earlier.

The gains came as Netflix added over 8 million paying subscribers in the quarter for a total of 277.65 million global streaming paid memberships, more than analysts had anticipated.

Netflix Phases Out Ad-Free Basic Plan in US, France To Boost Ad Business

As part of its strategy to boost its advertising business, Netflix said it would be phasing out its basic ad-free tier in the U.S. and France.

The company has already phased out the basic plan in the U.K. and Canada, which Netflix said contributed to a 34% sequential jump in memberships with ads in the second quarter.

Netflix said integrating ads onto the platform could raise revenue from advertisers and profit for the streaming giant’s business, allowing it to offer customers lower subscription prices.

The company said it anticipates $9.73 billion in revenue for the third quarter, slightly lower than analyst projections compiled by Visible Alpha.

Netflix shares were 1% higher in extended trading Thursday as of 5:30 p.m. ET following the release. They’ve gained about 32% since the start of the year through Thursday’s close.