Netflix investors got at least one surprise in its second-quarter earnings release: It's the latest company to have two CEOs.
The streaming giant promoted Ted Sarandos, its longtime content chief, to co-CEO alongside Reed Hastings, its founder and current CEO. But to quash any rumors that he's planning to hand the baton to Sarandos full time, Hastings said that he has no plans to leave.
"To be totally clear, I’m in for a decade," said Hastings. "This is two of us full time."
As part of the executive shuffle, Netflix also promoted Greg Peters, its head of product, to the role of COO. Peters will focus on developing Netflix's growing international presence, while Sarandos will continue to push forward the company's content initiatives with "increased external stature," Hastings said.
The executive change-up was just one detail in an otherwise mixed result for Netflix's second quarter.
Shares of Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report were down 9% in after-hours trading on Thursday after it beat subscriber estimates for the second quarter -- the first that overlapped entirely with the COVID-19 pandemic -- but issued a weak forecast.
The company guided for just 2.5 million new paying subscribers in the current quarter, much lower than the consensus of 5.27 million. The company pinned the weakness on a pull-forward effect, whereby customers who would have otherwise signed up in the latter half of this year opted to join earlier because of COVID-19.
"As a result, we expect less growth for the second half of 2020 compared to the prior year," the company wrote.
This sets up a potentially confusing few quarters for Netflix investors, with COVID-19 muddying year-over-year comparisons, Loup Ventures' Gene Munster wrote on Thursday.
"Investors are entering what could be six quarters of noise around Netflix reporting metrics, given the impact of the pandemic on moving subscribers forward this year," he wrote. "This implies Mar-22 will be the next quarter with clean year over year comparisons."
Netflix's programming schedule for the second half of the year is largely intact because the productions happened far in advance, the company said in its shareholder letter. But in 2021 the slate might be thinner than normal owing to COVID-related disruptions.
Nonetheless, Netflix management hinted at plans to remake the service in ways that will help lure and retain new subscribers around the world, such as improving the user interface and recommendation engine to reduce the time a viewer spends browsing for titles.
"Netflix in 2021 is going to be a much better service than Netflix in 2020...the growth opportunity is as big as ever; there’s just that near term pull-forward you're seeing," added Spence Neumann, Netflix's CFO.
Executives on the call also left the door open for the possibility of price increases, at least in some regions, based on a combination of macroeconomic factors and other signals like engagement and churn.
With new subscriptions slowing in the U.S., its most mature market, Netflix has set its sights on international markets as its next phase of growth over the next decade.
In the second quarter, Netflix added 2.75 million subscribers in EMEA (Europe, Middle East and Africa), 1.75 million in LATAM (Latin America), and 2.66 million in APAC (Asia-Pacific), in addition to 2.94 million in the U.S. and Canada.
Netflix shares are up 40% year to date.