Netflix Adds 5.9 Million Subscribers After Password Crackdown

Netflix added 5.9 million subscribers during the second quarter as the streaming service began its crackdown on password sharing.

The company generated $8.19 billion in revenue during the three months ended June 30, compared with $7.97 billion in the same quarter last year. Net earnings were $1.49 billion, compared with $1.44 billion in the same quarter last year.

The company earned $3.29 per share, far surpassing analysts' expectations of $2.85, according to estimates compiled by FactSet.

Global subscribers grew 2.5% over the three months to 238.4 million from 232.5 million in the first quarter. Year-over-year, subscribers grew by about 8% from 220.7 million last year.

Though revenue grew 2.7% from a year ago, it missed Wall Street consensus estimates of $8.3 billion, according to Bloomberg. The company forecast $8.5 billion in revenue for the third quarter, which further disappointed investors. The mixed report drove the company's shares down by about 4.5% in aftermarket trading.

Netflix said it was too early to see the "full benefits" of its paid sharing and ad-supported plans, but expects revenue growth to accelerate in the second half of this year.

In May, the streaming company announced it would limit password sharing to people living in the same household. Users now have to pay $7.99 to add members or transfer a profile to a new paid membership. Despite initial backlash, subscribers more than doubled in the days following the measures from its previous 60-day average.

Hours before releasing its earnings, Netflix removed its most affordable ad-free plan in the U.S. and U.K. in an effort to push users towards its new ad-tier system, which it introduced last November. Subscribers who are currently on the basic plan can remain on it until they cancel or change plans.

Ahead of the earnings release, UBS analyst John Hodulik hiked his price target on Netflix to $525 per share from $390, CNBC reported. Goldman Sachs also upgraded Netflix shares to neutral from sell on July 5, with analyst Eric Sheridan increasing his price target to $400 from $230.