Netflix (NFLX) reported second quarter earnings on Thursday that initially sent the stock 6% lower in after hours trading after the streaming giant's revenue outlook missed Wall Street's expectations for the current quarter. But shares recovered during the earnings call as investors digested another 8 million-plus subscriber gain and a beat on both the top and bottom lines.

Revenue hit $9.56 billion in Q2, an increase of 16.8% compared to the same period last year, as the streamer continued to lean into top-line initiatives like its crackdown on password sharing and ad-supported tier, in addition to last year's price hikes on certain subscription plans. Analysts were expecting $9.53 billion, according to Bloomberg.

Netflix guided to third quarter revenue of $9.73 billion, a miss compared to consensus estimates of $9.83 billion. The company did increase its full-year 2024 revenue growth projection to 14% to 15%, up from the prior 13% to 15%. It also expects full-year operating margins to hit 26%, an increase from the previous 25%.

"Our updated revenue forecast reflects solid membership growth trends and business momentum, partially offset by the strengthening of the US dollar vs. most other currencies," management said in the earnings release.

Diluted earnings per share (EPS) beat estimates in the quarter with the company reporting EPS of $4.88, above consensus expectations of $4.74 and well ahead of the $3.29 EPS figure it reported in the year-ago period. Netflix guided to third quarter EPS of $5.10, ahead of consensus calls for $4.74.

Subscribers once again came in strong with another 8 million-plus users added on the heels of key programming, such as the latest season of "Bridgerton."

Subscriber additions of 8.05 million beat expectations of 4.7 million and follows the 9.3 million net additions the streamer added in the first quarter. The company had added 5.9 million paying users in Q2 2023.

Leading up to Thursday's release, Netflix's stock had been on a tear. Shares are currently up more than 30% since the start of the year.

In May, Netflix announced it won the streaming rights to two NFL games set to air on Christmas Day as part of a three-season deal. The company also told advertisers at its May Upfront presentation that its ad tier has reached 40 million global monthly active users — a significant jump from the 15 million users the company revealed back in November and a 35 million-user increase compared to the year-ago period.

In the earnings release Thursday, the company said it's making "steady progress scaling [its] ad business" with ad tier memberships growing 34% quarter on quarter.

In another bid to boost the ad tier, the company said it will phase out its basic plan membership in the US and France after removing that sign-up option in the UK and Canada last year. The basic tier had previously been its cheapest ad free plan at a price point of $9.99 in the US.

"Given this sustained progress, we believe that we’re on track to achieve critical ad subscriber scale for advertisers in our ad countries in 2025, creating a strong base from which we can further increase our ad membership in 2026 and beyond," the company said.

The growth comes as the streamer has raised the prices of its ad-free subscriptions in an attempt to lure more users to its ad-supported offering. Netflix's password-sharing crackdown has also lifted top-line growth and increased the platform's overall subscriber base.

But it hasn't been an entirely smooth trajectory upward. In April, Netflix said it would stop reporting subscriber figures, along with a key profitability metric, average revenue per member, or ARM, beginning next year.

That's raised concerns about the company's long-term subscriber growth and whether or not recent growth momentum can be sustained over the long term.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at [email protected].

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